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If you have followed this blog long enough, you will know that we believe that the responsible use of a credit card can have a wide range of benefits. As the pandemic restrictions begin to lift, Canadians like you have more reason to make larger purchases.
Maybe you wanted a new laptop, appliance, or furniture; the bottom line is that most Canadians will likely opt to buy these goods on credit. In fact, a survey conducted by the Bank of Canada found that credit card purchases make up 56% of the total value of goods and services purchased.
Instead of carrying a balance month to month and paying ungodly amounts of interest, what if we told you that some credit card companies would offer installment plans for these large purchases at favourable rates?
In this article, we will be talking about the buy now, pay later plan and some of the options available that you can use to your advantage.
Let’s get started.
The buy now, pay later plan is essentially financing a purchase with credit. You can buy something in full with the option of spreading the payments over time. There are many buy now, pay later options in Canada, and the movement has grown with programs offered by companies like Afterpay, Sezzle and PayBright.
There are two types of buy now, pay later options to consider:
The equal payment plan, also called installment payments, establishes the minimum amount you pay each period. When your payment period arrives, you pay the agreed upon amount until it is paid in full.
Most credit card issuers will opt for this.
The deferred payment plan has no set payment amounts. You will essentially pay the balance in full when the due date has hit.
Several major credit card issuers offer credit card installments with varying fees and application processes. The process for most is relatively straightforward.
To get a plan started with your credit card, you can log into your account to see the qualifications, select the eligible purchase you would like to make, find out the cost and installment plan, and there you have it!
Here is a look at some of the top issuers of installment loans. As we mentioned before, most issuers will offer favourable interest rates and low fees. These figures are usually based on the total amount and are charged monthly.
Note: For some of the companies featured, these credit card offers will not be shown in Quebec.
The Scotia SelectPay plan offers cardholders a 0% interest rate on purchases of $100 or more.
Payment options range from 3,6 and 12-month periods. While there is a SelectPay fee, you will not be charged any other fees associated with setting up the installment plan. This could be an excellent option, considering that the monthly installment fee is calculated by multiplying the entire purchase transaction amount by the total fee % and dividing it by your total months.
Below provides detail on how the plans are structured:
It’s time to look at the numbers in action. Let’s say you bought a refrigerator for $900 on a 3-month installment plan with a 2% total fee.
At the end of your term, you would have paid $918. Considering that your average credit card charges 20% interest, this is not bad at all!
Here is a list of a few Scotiabank credit cards eligible for the installment plan:
Next up on the list is the CIBC Pace It™ plan. This credit card installment plan is issued to cardholders in good standing and who make purchases over $100.
The CIBC Pace It™ offers cardholders installment options at 6, 12 and 24-months. Unlike the Scotia Bank plan, interest rates vary across each installment option with a one-time installment fee of 1.50% on the purchase amount.
The payment structure looks like the following:
For simplicity, you could purchase a laptop for $600 on a plan that spanned over 6 months. Here is a breakdown of what that would look like:
You would end up paying a total amount of $619.56. This plan only applies to select CIBC credit cards, including:
Plan It™ from American Express is a feature that allows cardholders to defer portions of their balance and pay monthly installments on purchases of $250 and over.
Plan It™ offers eligible users 4 plan options based on their balance amount and account history. These options range from 3, 6, 9, and 12-month periods and come with a monthly fee of 0.90% of the principal amount.
Here is an example:
For a total breakdown, we could use the imagine purchasing an ergonomic desk for $1,000 on a 6-month term. The plan would look like the following:
At the end of your term, your total amount paid would be $1,054. You can also use the Plan it calculator to help you map out the cost of other items you may be interested in buying.
For reference, a select number of cards are eligible for this feature, including:
Plan options and fees may be subject to change depending on the card you own when you make your plan.
Announced in July, Visa is collaborating with company Desjardins to establish installments for merchants and eligible cardholders.
Desjardins has previously offered financing to its users through its Accord D feature. Accord D provides easy financing options on large purchases over $500 and up to $50,000.
Desjardins’ current Accord D financing is much more generous in its terms with eligible cardholders given the possibility of repaying over a period of 6 months to 10 years.
Interest rates are generally fixed and based on the amount, credit history, and loan terms.
While interest rates vary, using Desjardins rate calculator, we can determine what a $1,000 appliance would cost on a 6-month term and a fixed rate of 14.39%.
The total cost would equal $1,042.38.
While the announcement of the Visa-Desjardins collaboration is still in the works, you can visit both Visa’s website and Desjardins to learn more about the cards eligible for this program.
Last but certainly not least, we have the MBNA payment plan. Like some of the previous plans, the MBNA payment plan takes effect for purchases over $100.
Eligible cardholders can choose from 6,12, or 18-month payment plans with the following payment structure:
A great example to highlight the benefits of this plan is purchasing a brand new tv for $1,200 on an 18-month term. Let’s break it down in more detail:
At the end of your term, you would end up paying $1,296, which is reasonable considering the added flexibility you added to your budget.
Below, you can see a list of a few eligible MBNA credit cards:
For more information, hop onto MBNA’s website to see what you need to qualify and get answers to any questions you may have.
It is important to note that these plans and prices depend on several factors, such as your credit score.
If you do become eligible for an installment plan, it is best practice to avoid doing the following:
Considering all this information, the buy now, pay later plans are flexible payment options for your budget, especially if you can’t reasonably afford an item outright.
Make sure to do your due diligence before you sign up for a plan and reap the fantastic benefits this plan has to offer.
Savings this way:
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