Pros and Cons of Paying Over Time

August 2018

How often do you choose to pay for something over time? Consider when you've decided to use a loan or credit card to pay for something - these are both instances where you pay over time. Choosing to pay over time can be convenient; however it can also be costly if you don't consider interest, fees, and other charges. To ensure you are saving your money, try to minimize the amount of interest you pay by paying off the debt as soon as possible. There are situations in which paying over time is the right choice, but many more situations when it is not.


With careful planning, paying over time can be a useful financial tool. It can be used for large purchases, such as a home or a vehicle, provided the loan fits in your budget. However, before using a credit card to buy a big ticket item or to take a trip, create a plan to pay it off quickly.


There are many ways in which paying over time can be costly.

Offers with 0% financing may seem like good deals, but make sure to always read the entire contract including the fine print. Many of these deals indicate if a payment is late or missed the terms of the loan change which results in a higher payment and interest rate.

Charge cards that require you to pay off the balance each month also offer a pay over time option, where you can choose which charges you want to pay over time. However, often times certain charges are automatically chosen. If you decide to use this option, you should try to pay more than the minimum amount specified by the card issuer.

Credit card features that allow you to designate charges to pay over a longer period of time, or allocate your payment to specific charges, are marketed as helpful to you but could potentially cost you more. By spreading out your payments, you end up paying more in interest. While few cards offer these features, one card issuer is offering a flexible installment program overseas which allows the card holder to turn a transaction ($500 minimum) or their account balance into a separate loan with a specified interest rate of 5% to 36% and a term of 6 to 48 months.

To make purchases easier, some businesses have partnered with online financing companies. This is done by choosing the online financing company at checkout, then your purchase is paid for with a loan from that specific company. Even though you may have a choice of the number of months to repay the loan, you may not be able to pay it off early without penalty. Another drawback is not being approved for the full amount after the sale is completed and having to pay the finance company the balance immediately.

Compare all payment options before choosing to pay over time

Before you whip out a credit card to pay for a big ticket item such as the latest smart phone or sign a contract promising "no interest or payments until 2025" for purchases, always compare all your options for paying for the items and determine which option works best for you. Remember, when paying for everyday expenses such as groceries, gasoline, office and school supplies, or utilities pay them off in one payment and not over time.



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