Credit Cards Offer “Pay Over Time” Installment Plans for Large Purchases

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Convenience, cost, and ease of access are a few reasons four-payment installment plans have become such a popular payment option, despite some potential drawbacks. In response, a handful of credit card issuers have introduced their own installment option.

Credit cards have always offered the ability to “pay over time”—it's a feature intrinsic to credit cards. Fixed “pay over time” payment plans, however, can be appealing because they offer a structured repayment plan, with a set amount and a set payoff date.

If you have a large purchase coming up, it's worth checking to see whether your credit card offers a fixed “pay over time” option.

How credit card installment plans work

Credit card installment plans are an option for repaying eligible purchases that you've already paid, so you don't have to change how you shop. After you've made a purchase, log in to your online account and look for the option to set up a payment plan next to that purchase. There, you can review available plans and pick the one that works best for you financially.

Note that you won't be able to create an installment plan for cash advances, balance transfers, or fees. Purchases above a set minimum amount, like $75 or $100, are generally eligible.

All the benefits and protections that come with having a credit card still apply. For instance, purchases continue to earn rewards based on your rewards program. If you have issues with a transaction, you can dispute it as long as you're still within the 60 days allowed by the Fair Credit Billing Act.

Refunds may require an extra step. When you return a purchase, the refund is credited back to your credit card, but won't automatically reduce your plan balance. You can contact your credit card issuer to ask about having the refund credited to your plan to correct your balance.

“Pay over time” plans use your existing credit limit, so you don't have to open a new account to use the feature. Since your credit report will likely list a single balance including both plan and non-plan balances, it's worth considering how your credit utilization may be affected before creating a new plan. You can pay your plan balance early with no penalty, but you'll have to pay off the full balance including the amount outside the plan.

Small monthly fee, but no interest

Credit card installment plans don't require a down payment and offer longer repayment terms, but you do pay a monthly fee. The fee is calculated based on the balance, plan duration, APR, and other factors depending on the card issuer. Credit card issuers offer seasonal or introductory promotional offers from time to time. You can potentially save on fees by checking for deals before setting up your plan.

Since you review and select plans based on cost and timing, you'll have the benefit of knowing the full cost before selecting a plan. Choose carefully—once you create a plan, it can't be changed or canceled. If you aren't thrilled by the options, you can still pay the balance in full or over time with regular monthly payments.

Making monthly payments

Your plan payment is due every month just like a regular credit card payment. If you have a balance that isn't part of the installment plan, you're still responsible for paying at least the minimum. Fortunately, both are combined into a single monthly payment, so you won't have to keep up with different due dates.

Paying your full non-plan balance each month allows you to avoid interest on new purchases. While cash advances and balance transfers usually don't have a grace period, you can minimize interest cost by paying these balances off earlier.

Balancing convenience and cost

Paying your credit card balance in full is ideal. Taking advantage of a 0% promotional rate is another interest-free option for large purchases, but you'll have to qualify. Finally, if you opt to “pay over time” with an installment plan, choosing a shorter duration and avoiding new purchases can keep your borrowing costs low.

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LaToya Irby

LaToya Irby is a financial writer with over 14 years of experience. She's been quoted and published as a credit expert in several major publications including USA Today, U.S. News and World Report, TheBalance.com, and The Chicago Tribune.