Several different credit cards let cardholders pay off a portion or some of their outstanding balance through an instalment plan. These payment options break down your balance into monthly instalments spread over a fixed time or predetermined rate. For example, if you had a $1,000 balance and set up an instalment plan over ten months, you’d pay $100 per month instead of paying it all off at once. This is a basic calculation used as an example only, it does not include the addition of interest to the amount borrowed.
We’ll go over key factors to consider before setting up an instalment plan with your credit card, how it works, and the pros and cons next.
How do Credit Card Instalment Plans Work?
Instalment plans give cardholders a structured repayment schedule spread out over a select term. Instead of paying a lump sum for all of your balance at the end of the billing cycle, you’ll pay a fixed percentage of it each month, at a pre-determined interest rate.
Depending on the card issuer and card itself, you could set up your instalment plan for part of your balance, the full balance, or for specific items.
What Types of Credit Card Instalment Plans are Available?
Instalment plans vary from lender to lender, but Citi currently offers three choices for their credit card holders. You can use:
- Citi FlexiBill1 – If you’ve purchased items that total $500 or more, you could be eligible for the Citi FlexiBill Instalment Plan. You can convert your retail purchases into monthly instalments. You can choose your repayment terms based on the offer you received. You can pay it off quicker and pay more each month.
- Citi PayLite1 – You can use Citi PayLite to convert your eligible unbilled retail purchases into instalments and pay them off at a select term of your choice. You can choose your repayment terms based on the offer you received.
- Citi Quick Cash1 – This offer lets you request from $500 up to your available credit limit from your Citi credit card. You can choose your repayment terms based on the offer you received.2
What are the Pros and Cons of Instalment Plans?
There are pros and cons to consider when you set up an instalment plan. They include but are not limited to:
- Budgeting – Since instalment payments are monthly repayments, it’s easy to know what you need to pay each month.
- Perks – Depending on the lender, they may offer perks or benefits like bonus points or a lower interest rate when you set up your instalment agreement.
- Additional Fees – You may have to pay additional fees like a set up fee for the instalment agreement, or penalty charges for missing or being late with your payment. Deferred interest is another large fee if you don’t pay your balance off in time.
- Not as Flexible – If you want to be able to pay smaller amounts one month and larger amounts next month, instalment agreements don’t give you this flexibility.
This infographic offers further guidance on how instalment plans can be used to help better manage debt.
A credit card instalment plan can help ease your financial strain and help you to budget more effectively. You want to research your options and make sure that you’re making the best choice for your situation. Used correctly, instalment plans can help you manage your payments.
- Citi FlexiBill, Citi PayLite and Citi Quick Cash are defined in the Credit Card Terms and Conditions as a Fixed Payment Option. Fixed Payment Option offers are subject to eligibility and only available if your account is and remains in good standing. Your Fixed Payment Option uses part of your existing credit limit. As you pay off your Fixed Payment Option, the amount you pay off will become available for you to use again as part of your credit limit at the standard Annual Percentage Rate applicable to your account. For the full terms and conditions of your Fixed Payment Option, please refer to the Credit Card Terms and Conditions and Other Important Information.
- Quick Cash funds are made available the same day if you have a Citibank transaction account. If your account is with another financial institution or you don’t have an account and require a cheque, this will take longer.