Buy Now, Pay Later: Flexible Payment Options in Canada
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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.
What is the buy now, pay later plan?
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:
1- Equal payment plan
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.
2- Deferred payment plan
The deferred payment plan has no set payment amounts. You will essentially pay the balance in full when the due date has hit.
How do I get started?
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!
Who offers these plans? Top 5 credit card issuers
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.
1- Scotia SelectPay
What does this plan offer?
The Scotia SelectPay plan offers cardholders a 0% interest rate on purchases of $100 or more.
Payment options
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
Total breakdown
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.
| Purchase price | Term | Monthly fee amount | Monthly payment |
|---|---|---|---|
| $900 | 3 months | $6 | $306 |
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:
- Scotiabank® Value VISA card
- Scotiabank Gold American Express Card
- Scotiabank Passport Visa Infinite +* Card
2- CIBC Pace It™
What does this plan offer?
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.
Payment options
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
Total breakdown
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:
| Purchase price | Term | Monthly fee amount | Monthly payment |
|---|---|---|---|
| $600 | 6 months | $9 | $101.76 |
You would end up paying a total amount of $619.56. This plan only applies to select CIBC credit cards, including:
3- Plan It™ from American Express
What does this plan offer?
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.
Payment options
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
Total breakdown
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:
| Purchase price | Term | Monthly fee amount | Monthly payment |
|---|---|---|---|
| $1,000 | 6 months | $9 | $175.67 |
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:
- American Express Cobalt™ Card
- American Express® AIR MILES®* Platinum Credit Card
- Marriott Bonvoy™ American Express® Card
Plan options and fees may be subject to change depending on the card you own when you make your plan.
4- Accord D by Desjardins
What does this plan offer?
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.
Payment options
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.
Total breakdown
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%.
| Purchase price | Term | Monthly fee amount | Monthly payment |
|---|---|---|---|
| $1,000 | 6 months | $0 | $173.73 |
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.
5- MBNA Payment Plans
What does this plan offer?
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.
Payment options
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
Total breakdown
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:
| Purchase price | Term | Monthly fee amount | Monthly payment |
|---|---|---|---|
| $1,200 | 18 months | $5.3 | $72 |
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.
For more information, hop onto MBNA’s website to see what you need to qualify and get answers to any questions you may have.
What to avoid
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.
Conclusion
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.
- Annual fee
- $191.88
- Our valuationMilesopedia first-year estimate First-year valueWelcome bonus$255Total$255Rewards on your spending are not included. The calculator that adds them from your own profile is on the card's page.
- $255
- Welcome offerGet 1,250 points after $750 in purchases per month for 12 months
- Up to 15,000 points
Apply Now
on American Express's website
Apply with confidenceCheck whether your application will be approved before you submit it, with no impact on your credit score*When you apply for a personal American Express Credit Card, we will tell you whether you are eligible without affecting your credit score. So you can apply with confidence.*Instant decisions are only available for consumer Card applications (also called “personal Cards”).
