Buy Now, Pay Later: Flexible Payment Options in Canada

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:

• 3 months at 0% interest, 2% total fee
• 6 months at 0% interest, 4 % total fee
• 12 months at 0% interest, 8% total fee

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:

• 6 months at 5.99% interest, 1.50% one-time fee
• 12 months at 6.99% interest, 1.50% one-time fee
• 24 months at 7.99% interest, 1.50% one-time fee

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:

• 3 months at 0% interest, 0.90% monthly fee
• 6 months at 0% interest, 0.90% monthly fee
• 9 months at 0% interest, 0.90% monthly fee
• 12 months at 0% interest, 0.90% monthly fee

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.

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:

• 6 months at 0% interest, 4% plan fee
• 12 months at 0% interest, 6% plan fee
• 18 months, 0% interest, 8% plan fee

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:

• Neglect to make payments: This should be a given, but you would be surprised how often people can get overwhelmed with their personal finances that they don’t make their payments on time. To be 100% prepared, consider creating an emergency fund.
• Forget to read terms and conditions: You should always read the fine print on these plans so that you are not on the hook for any additional charges.
• Spend more than you can afford: If appropriately done, buy now, pay later plans can save you more interest than credit cards. The problem arises when you bite off more than you can chew. Understanding your budget will be vital in avoiding this.

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.