Paying for big ticket items on an Easy Payment Plan has become common practice in the region. But how do the plans work and what are the pitfalls? We find out.
You are in the mall and you spy a new television, laptop or a dazzling engagement ring for your fiancee. You want to buy them but you know it will take months to save up, so you put the products to the back of your mind.
However, a number of banks are now offering customers an Easy Payment Plan (EPP) to help them buy the products they want straightaway. By staggering the repayments over a few months at 0% interest, it allows consumers to get what they want, when they want.
To give you an example, take a typical EPP on a standard credit card. With this feature you can buy the engagement ring, convert the purchase into an EPP transaction by calling the credit card provider’s call centre, sending an SMS or the relevant process of your provider and paying back the amount over 3, 6, 9 or even 12 months.
There are no extra charges involved, however, like any financial product there are some limitations.
Not all shops have the partnership with banks to provide EPP
The first is that any financial institution offering an easy payment plan, is only tied to certain retailers. So if you have your eye on a particular laptop in a particular shop, it would be worth checking if your credit card has partnered with that retailer. If not, you are limited to the retailers listed on the payment plan’s list.
Different criteria for different merchants
Secondly, there are different criteria for every EPP. Some limit repayment periods to 12 months, others only six months and others even less. So check the EPP tenure before you proceed because if it is too short, it could make your repayments too high.
There is generally a minimum spend
The other issue to consider is how much the minimum purchase amount is. Every plan and every retailer within that plan will demand different purchase amounts – typically around USD 250 – so if the item you want only costs USD 150, for example, it might not qualify for the plan.
Early settlement fee
Finally, while you can pay off an EPP early, doing so could incur a foreclosure fee. And while you can have multiple transactions under these programmes on 0% installments, you need to ensure you stay within the credit card limit on your card.
Different credit cards or retailers will offer promotions. So an electronics store that offers 0% finance for six months might suddenly extend that to a year during a shopping festival. It’s also wise to keep an eye out for a bank’s EPP expiry dates as offers can come with a limited time frame so you might miss out on a deal.
If you are looking to sign up for a new credit card to make a high-value purchase, shop around for the best offer and check which merchants the card is tied up with. Alternatively go direct to the merchant and find out which banks they have tied up with for EPPs. Some stores have multiple partnerships with several banks.
However, remember that although EPPs come with 0% interest, they are still a form of debt and failure to make the repayments could incur charges or see the transaction reverted back to a standard credit card purchase. If you don’t think you can afford the repayments, don’t make the purchase at all.
You can search and compare all credit cards by fees, rates, benefits on our site at Souqalmal.com and look out for different offers.