What is a credit card installment plan and how can I make the most of it?

Over the last few years, installment plans have been gaining popularity among Canadians of all ages, from Gen Z to boomers. For many, the appeal of an installment plan (if you have this feature on your credit card) is that it gives you another way to pay for your credit card purchases and pay off your balance.

Let's dive into what it is and how it works.

A credit card installment plan is a way to pay for purchases made over a fixed period – through your credit card. It can help you to take control of your budget and manage your spending by providing flexible payment options on your credit card.

Instead of trying to come up with the money to pay off your credit card purchase in one lump sum, the  installment plan feature - if included with your credit card - allows you to split your payments up over time - usually over three, six, or 12-month periods.

An installment plan also usually includes a fee, which can work in different ways like a monthly fee or a total upfront fee. Under these plans, you will know in advance what you will need to pay on each installment per month.

It’s important to not confuse a credit card installment plan with a "buy now, pay later" option. With credit card installment plans, because these payment options are a feature included on your existing credit card, you don’t need to do an additional application or credit check to take part.   Note that not all credit cards include the installment plan feature but if they do you may wish to consider one for your next purchase. 

There are different providers who offer these types of installment plans, including banks, merchants, and retail companies.

Let's say your laptop stops working and you need to buy a new one for$1,200. You may not have an extra $1,200 sitting around but, you still need a new laptop in order to do your job. So, you put the $1,200 purchase on your credit card.

With a credit card installment plan, you can choose to convert an eligible purchase, paid for with your credit card, into several payments on your credit card. This means you can split up your $1,200 purchase and pay it back in multiple smaller installments based on the terms of your installment plan. You will need to pay your minimum payments each month for the installment plan and that amount is based on your specific purchase and the repayment period you choose.

Let’s say you bought a $1,200 laptop and converted it into a 3-month Scotia SelectPay installment plan with a low installment interest rate of 5.99% and no installment plan fee.

Your payments and interest for your Scotia SelectPay plan would be as follows:⁴

Here’s how much you could save on interest on that same purchase for 3 months versus if you paid it off at a typical credit card annual interest rate of 20.99%:⁴

For illustrative purposes only. Certain assumptions and exclusions apply. See below⁴ for more details.

You can also use installment plans for larger purchases that you have planned, like a home renovation. When you are looking at all the expenses of your planned renovation, you can use an installment plan to manage your payments.

Scotiabank now offers an installment plan available on eligible Scotiabank Visa^* credit cards called Scotia SelectPay^TM. With Scotia SelectPay^TM, there is a minimum purchase price of $100 but no maximum purchase amount. You can choose to have several active installment plans going at the same time. This can help you control your monthly budget while managing unexpected expenses, like car repairs, or larger purchases you may be making, like new appliances.

Make eligible credit card purchases¹ more manageable. No credit checks needed.

Interest rate – Enjoy low installment plan interest rates and no installment plan fee during the payment period²

Choose flexible payment options to suit your budget³

Continue to earn and enjoy all your credit card benefits like your rewards, cash back, and insurance coverage.

You qualify for a Scotia SelectPay plan, if:

• You are the primary cardholder of an eligible Scotiabank credit card
• Your eligible Scotiabank credit card account is in good standing
• You made an eligible purchase of $100 or more (CDN$) with your eligible Scotiabank credit card account
• You reside in a province or territory in Canada other than Quebec

Whether or not an installment plan is right for you depends on your financial needs and how you budget.

Like using any credit card, you want to make sure you use your installment plan (or plans) that are part of your credit card responsibly. It's important that you are not making purchases that will overly stretch your budget even if you want to use the installment plan on your card to pay that purchase. You will need to build the amount of your installment payments that are part of your credit card balance into your monthly budget so that you can pay them off on time each month and keep your Scotiabank credit card account and credit score in good shape.

You can talk with your Scotiabank advisor to find out if credit card installment plans are the right choice for you and your budget.