powering smart financial decisions

What you should know about credit card instalment plans

What you should know about credit card instalment plans

Credit cards are hugely popular and easy to use, but remembering to make repayments to avoid interest can be a challenge. Some card providers offer a credit card instalment plan, which means you can pay off your credit card debt in parts, over a few months. In some cases, this can still involve paying interest on the outstanding credit card balance, but often the card company offers to reduce the rate or waive it completely for the term of the plan. It’s worth checking if you have to pay any additional fees or charges when choosing to pay through a credit card instalment plan.

What is an instalment plan on a credit card? 

A credit card instalment plan allows you to make regular repayments off the card balance, as opposed to the more traditional method of paying a lump sum after a big purchase or when cash flow allows. 

One of the benefits of instalment plans is you can pay what you can afford to pay off at regular intervals and may receive a lower - or no - interest rate. 

Credit card instalment plans often have strict conditions attached. You often have to commit to making regular, minimum repayments. If you fail to make a scheduled repayment, you could attract a fee or interest. It’s always worth forensically checking the terms and conditions to make sure they work for you. 

Some things to consider with credit card instalment plans

Credit cards with added benefits like reward points, shopping discounts or instalment plans often require you to pay a large annual fee. If you’re someone who pays off the credit card balance in full after each billing cycle, paying an annual fee may not be what you want.

Similarly, in exchange for a lower or waived interest rate, credit card instalment plans often require cardholders to commit to making certain monthly repayments. These arrangements may be better suited to people who have the capacity to pay off their card fairly consistently (i.e a regular income). Again, if you fall behind, there could be consequences for the hip pocket.

A credit card instalment plan may also include conditions about exiting or closing the plan, either midway or after paying off the full amount. As always, it’s important to read the fine print.

Did you find this helpful? Why not share this article?

This article was reviewed by Kate Cowling before it was published as part of RateCity's Fact Check process.



More credit cards articles

More articles? Read more here

Learn more about credit cards