Installment cards

[Father]

Not so long ago, a new product appeared on the financial market - installment cards. Let's take a closer look at what they are, how to use them, what are their advantages and disadvantages.
An installment card, as the name suggests, allows you to buy goods in installments, which can take anywhere from 2 to 12 months. And you don't need to pay for it - no interest, hidden fees and insurance. Sounds suspicious. But this is not free cheese in a mousetrap or charity on the part of the bank - the product is thought out so that neither the bank that gave you the installment plan, nor the store where you bought the goods, would not be left behind (otherwise why would they need all this?).
The bank earns on the commission paid by partner stores. And the shop owners benefit from such a partnership: you will come to spend money with them, you will not go to competitors, since you are offered such attractive conditions. Your benefit is that you buy the product today and pay little by little later.

How are installment cards different from credit cards?
By law, both a credit card and an installment card are “cards with an overdraft limit,” and an overdraft is essentially the same loan.
So the principle of operation of both credit cards (especially those that have a long grace period - a period until interest on the debt is charged) and installment cards is similar: there is a limit on the card, that is, an available amount of money, and you can use it to buy something. And then pay off the debt by making payments. If you actively and conscientiously use the card, both by installments and credit, then the bank can increase your limit. If you do not return the debt to the bank, sanctions will follow - this applies to credit cards and installment cards. The installment plan, if the client did not return the money on time, will turn into a loan at a certain percentage, for example, at 10% per annum (but each bank has its own conditions, they need to be clarified). If you do not meet the grace period on a credit card, you will also have to repay the debt to the bank, but it is possible that the interest in this case will be higher,

Differences between installment cards and credit cards

• With an installment card, you can spend money only in stores that are partners of the bank. Credit card anywhere.
• You cannot withdraw cash from an installment card. You can use a credit card, but usually you have to pay a commission for such an operation.
• Service of installment cards, which are currently on the market, is free of charge for the client. The bank may charge an annual fee for servicing credit cards, for example, standard cards usually cost around $ 15 a year, the cost of premiums can go up to $ 200. Moreover, this money is usually debited from the account the next day after activating the credit card - for many clients this turns out to be an unpleasant surprise.

If they call you from the bank and offer you a profitable card
The bank employee informs you that there is a special offer for you - a card that can be used without interest. And she is already ready, you just need to pick her up with a passport from the department. If you ask if this is an installment card, perhaps they will answer you evasively and begin to convince you that their offer is more convenient and generous.

Do not take our word for it, be sure to specify:

• whether it can be used in all stores;
• is it possible to withdraw cash from an ATM;
• how much does it cost to service this card, are there any paid SMS notifications, are there any hidden fees;
• what percentage awaits you in case of non-payment of the debt on time.

So you will understand that in front of you is a credit card with a long grace period or an installment card and how this "special offer" will turn out for you.

Benefits of installment cards

• The main advantage of such a card is that you can make unexpected purchases, but only in certain stores.

Oksana's washing machine suddenly broke down. She did not plan to spend on the purchase of new equipment, but a month ago she issued an installment card (she hadn’t bought anything with it yet - she was afraid of credit cards and was also expecting a trick from the installment plan) and decided to use it. With the help of the card, she bought a car in a store - a partner of the bank for $ 200 in installments for 5 months - at first she had to pay $ 50, and then 4 more times for $ 50.

• It is not difficult to obtain a card - as a rule, you only need a passport and an official employment document. Some banks have the option to submit an application online, and if everything is in order with your credit history and documents, you will receive approval.
• Service of installment cards that exist now on the market is free of charge. Some banks even offer cashback (partial refund of the money spent on the account) when purchasing certain goods. Details should be checked with a specific bank.

What to look for when issuing an installment card

• Installment up to 12 months does not work everywhere, study the offers of the bank and the store. Perhaps the installment plan for the product you need is valid for only 3-4 months, or even 1-2 months. And such a short time will not suit you.
• The card does not work in all stores, but only in certain partners of the bank. Study the list, perhaps you are not visiting and are not going to visit most of them. Check the prices for the product you need in competing stores: what if it costs much cheaper there, even if there is no installment plan?
• It happens that it is impossible to buy goods with discounts using installment cards. Perhaps the installment plan in such cases is unprofitable, you can buy the product much cheaper immediately for the promotion.
• Behavioral economists believe that the average customer check increases (sometimes 2-3 times) if the customer has the opportunity to buy now and pay later. So the risk of spontaneous unnecessary purchases also increases. Use the installment card with caution, soberly assess your needs.

Maria, after the experience with the washing machine, liked the opportunity to buy goods in installments without overpayment. She bought shoes, a clutch and a bronze horse with wings - she could not resist. Why restrain yourself, since you can pay later? In total, the installment payments turned out to be unexpectedly impressive and even overwhelming in one month. Maria was late in payment, received a fine and ruined her credit history.

• You need to make payments to the installment card on time, otherwise the bank will charge a fine and notify the credit bureau of the delay - this information will go into the client's credit history . Well, if you do not return the debt to the bank within the allotted time (for example, for 5 or 12 months in installments), you will have to pay the interest that the bank will charge on the balance of the debt.

It turns out that the installment card is convenient if you need a certain product, but you want to stretch the payment for several months and at the same time avoid interest. However, it is necessary to use such a card with caution, calculate the options and in no case delay payments. Otherwise, you will significantly overpay, and all the benefits will come to naught.