Buy now, pay later services present an appealing offer: Get something right away without having to pay any money, and spread the cost of the item over multiple fixed payments. Also known as point-of-sale loans, BNPL popularity soared as e-commerce spending increased during the pandemic.
In the past couple of years, three major credit card companies have started offering buy now, pay later-like installment plans for their cardholders. Here’s a look at how American Express Plan It, My Chase Plan and Citi Flex Plan work, how they compare with traditional BNPL plans, and when it may (or may not) be a good move to use credit card installment plans.
[Read: Best Rewards Credit Cards.]
What Are Credit Card Installment Plans?
BNPL transaction volumes have exploded in the past few years, jumping from $33 billion in 2019 to $120 billion in 2021, according to GlobalData. With the popularity and growth of BNPL offers, some credit issuers have created their own versions.
“It’s a competitive move to try to capture a little more share of the point-of-sale business,” says Mike Sullivan, consultant in personal finance to Take Charge America, a nonprofit credit counseling and debt management agency.
Credit card installment plans follow the general BNPL concept: They allow you to make a large purchase and then split the payments over a few months (or even years). While that sounds like a great deal, each of the credit issuers charges a fee or interest, meaning that using these plans come with a cost.
There are a couple of advantages of these plans: They don’t require a credit check, and you can set one up after you’ve made the purchase, unlike traditional BNPL services, which happen at the point of sale. With fixed payments and an end date in sight, they can help ensure that you eventually pay off a major purchase rather than revolve it on your credit card balance for longer periods.
How Does AmEx Plan It Work?
American Express Plan It, which began in 2017 and has been around the longest of the issuer installment plans, allows you to spread out payments for purchases of $100 or more. A fixed fee is applied each month, which will be based on the purchase size and your account history. When setting up your plan online, you can combine up to 10 qualifying purchases into a “multitransaction plan.” However, if you’re using the app, you can only use Plan It for one purchase at a time.
AmEx Plan It terms range from three to 24 months, and the fixed payment amount is added to each statement’s minimum payment.
What Is My Chase Plan?
My Chase Plan is Chase’s BNPL plan for cardholders, which launched in 2020. Anytime you make an eligible purchase that’s over $100, you can see in your online account or app if you have an option to pay using the plan. Plan options will depend on your account history and the purchase size, but plan terms typically range from three to 18 months.
After you choose a plan length, you’ll pay the same fixed amount each month, which will be added to the minimum amount due on your card. While you won’t pay interest, there is a flat My Chase Plan fee charged each month of your plan. The plan cost is added to your minimum payment amount each month.
How to Use Citi Flex Plan
Citi Flex Plan, which began in 2019, is for Citi cardholders and can be used for eligible purchases of $75 or more. You can choose to pay with the Flex Plan through your online account; eligible purchases will be flagged with the Flex Pay icon. You will typically be offered a few different payment options. If you’re an Amazon shopper, you can also opt to use Citi Flex Pay at checkout.
Of the three credit installment plans, Citi has the longest term available, up to four years (depending on the purchase and customer history). It also differs in that it charges a fixed APR on the purchase rather than a fee. The main benefit of the plan is not to save money, but to give you the discipline to pay off the purchase by a specified date.
|American Express Plan It||My Chase Plan||Citi Flex Plan|
|Term Options||3 to 24 months||3 to 18 months||Up to 48 months|
|Cost||Monthly fee||Monthly fee||Fixed APR|
|Unique feature||Can add up to 10 qualifying transactions to one plan||Eligible purchases start at $75 (lower than the others)||Can be applied during Amazon checkout|
[Read: Best 0% APR Credit Cards.]
Comparing Credit Card Installment Plans With Buy Now, Pay Later Services
Buy now, pay later services like Klarna, Afterpay, PayPal’s “Pay in 4,” Affirm and others are usually offered at the point of sale, unlike credit card installment plans that are activated after the purchase. While BNPLs vary, the overall concept is the same — you spread out your payments over time.
In the most common BNPL plans, consumers pay off their purchases in four payments. The credit card installment plans, on the other hand, have multiple payment term options.
With BNPL services, you don’t have to be a credit card user or go through a credit application to use them. Most also don’t charge any additional fees.
One thing that BNPL and credit card installment plans have in common, however, is the potential to encourage impulse buying, Sullivan says. “When you look at that particular article of clothing, saying, ‘It’s only $40 a month’ instead of saying, ‘It’s $160’ is a dangerous tendency for a lot of consumers.”
The Consumer Financial Protection Bureau also warns that failure to repay a BNPL loan or a credit card installment plan could be reported to a debt collector and/or the credit bureaus, and have a negative impact on your credit.
|BNPL||Credit Card Installment Plan|
|Term options||Generally four payments||Longer repayment term options|
|Cost||Usually no fee or APR||Fee or APR applied|
|When available||Plan offered at point-of-sale||Plan applied after purchase|
The Right Time to Use a Credit Card Installment Plan
Ideally, you’ll use these offers sparingly, such as if you need to make an emergency purchase but you’re short on cash. The best time to use a credit card installment plan is if you have high-interest cards and know you can remain diligent about making plan payments. This approach will actually help you come out ahead because your debt has an end date. “But you need to be a checklist kind of person — someone who regularly keeps tabs on the deadlines in their life,” said Howard Dvorkin, CPA and chairman of Debt.com.
When evaluating your options, Sullivan recommends that you crunch the numbers to see how much more you’ll be paying for a purchase using a credit installment plan once the fees (or APR in the case of Citi) are tacked on. If it’s significant, going with a no-fee BNPL or exploring other alternatives might make more sense.
One more tip: It’s always smart to check if your issuer is offering any promotions. For example, AmEx has been known to offer eligible cardholders a no-fee period to use Plan It.
Lastly, be sure that your budget can handle the additional monthly obligation of a credit card installment plan. “The payment terms seem generous, until you inevitably miss one,” says Dvorkin, noting that all of them charge late fees and can potentially impact your overall credit health.
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