I’m sure that most of you have read or seen the 0% Installment Plan promos of your respective credit card providers. Most credit cards in the Philippines have this facility. Sometimes, it’s seasonal and sometimes, this product is available all year round.
In most cases, this is implemented in partnership with select merchandisers. Some of the businesses that often have 0% Installment Plan agreement with credit card companies are mobile phone sellers and appliances and furniture sellers.
Some credit card providers have an after-purchase 0% Installment Plan service. It means that you can avail of this installment service after you have purchased something and you’ll be charged a service fee of course.
I have personally availed of the 0% Installment Plan when I bought some of my gadgets and appliances in the past. I find it a very convenient way to pay for my purchases.
However, as I become more financially aware, I realized that it may not always be the best option for consumers.
For new credit card owners, be aware that a credit card 0% installment plan can be a double-edged sword if you are not careful.
Advantage of the 0% Installment Plan
Lighter Monthly Payments
The main advantage of availing of the 0% installment plan is the option to pay a more manageable amount on a monthly basis. Depending on the available promo, sometimes, you can choose between 3 months, 6 months, 12 months, or longer.
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Ability to Buy Big-Ticket Items
Even if you don’t have the cash yet to pay for an item that you need (either for your personal or business use), you can buy the items using the 0% Installment Plan. This is very handy for those who really needed to buy something important but don’t have the cash to pay for it.
For example, if you’re a food seller and your refrigerator breaks down and your side-hustle highly depends on it (storage of food ingredients), you can easily buy a replacement via the 0% Installment Plan.
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Hold On to Cash Longer
Since the 0% Installment Plan does not require you to pay for the entire amount on your next due date, you have the option to hold on to your cash longer.
For example, if you have cash amounting to P36,000 intended for your laptop purchase that you’re going to use for your online side-hustle, you can hold on to most of your cash by availing of the 0% installment plan.
Your monthly due over the course of 12 months will amount to P3,000. You can put the rest of the lump sum money into a high-yielding savings account so you can earn some interest from it. If you pay your dues on time (on or before your due date) you will not be charged any interest.
Disadvantages of the 0% Installment Plan
Easy to Overspend
It’s easy to overspend if you know that you don’t have to pay for the full amount on your monthly due date. It might prompt you to buy a lot of stuff because you’re thinking that you can just pay on it on an installment basis anyway.
And this might become a dangerous habit if you get used to it.
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Instant Gratification Galore
Constantly indulging ourselves in instant gratification is detrimental to improving our self-discipline and control in life. If you have access to a financial vehicle that can give you 0% interest in big-ticket items, it will be so easy to splurge on the newest gadget craze or the latest trends in fashion.
This might not be helpful for your goal to achieve your financial independence at the earliest possible time.
Accumulate Debt by Buying Unnecessary Stuff
A lot of people think that when they have a credit card, they can buy anything they want and worry about the payment later. I know a lot of people who buy a lot of gadgets like mobile phones and laptops for personal use via the 0% Installment Plan.
This will easily put anyone who is not disciplined enough to handle their credit cards into a huge debt. If you know that you are prone to impulse buying, I highly suggest that you don’t bring your credit card with you when you go to shopping malls to avoid being tempted to buy unnecessary stuff.
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You Can’t Avail the Discounts on Cash Payments
A lot of appliance centers have cash discounts for cash payments which they don’t often advertise. Credit cardholders who buy appliances in 0% installment are not eligible for these cash discounts.
How to Make 0% Installment Work for You?
Instead of using it to fund your purchases of unnecessary stuff, see it as a financial tool that you can use to your advantage. This is actually a great thing to have especially if you are an entrepreneur.
Use it as a Leverage
Instead of using your credit card to buy unnecessary stuff on a 0% Installment Plan, why not use it to buy things that will be helpful for you to build assets.
For example, if you are planning to build online sources of passive income and if you don’t have a laptop yet, you can use this to buy a laptop as long as you know that you’re going to hustle hard to recuperate the initial cost of your investment which in this case is the cost of the laptop.
A little caution though, before you use your credit card to buy any side-hustle equipment, be sure to study first the business that you want to engage yourself with.
This will minimize the risk of wasting your time and money on this particular business.
Use it For Emergency Purchase
As I have mentioned earlier, you can use this for an emergency purchase. For example, if a piece of equipment that your business highly depends on breaks down and you don’t have the cash to pay for the full amount of the replacement equipment, then you can avail the 0% Installment Plan to replace it and to keep your business going.
This is not the ideal solution as every business or every person should have an emergency fund to fall back to. However, each of us has different situations in life, and sometimes, this is the best option to go for.
Just be sure to exercise due diligence by studying your other options before you use your card for this kind of emergency purchase.
Before you swipe your card for the 0% Installment Plan, be sure to read the terms and conditions to ensure that you are fully aware of the details and to avoid surprises on your next monthly bill.Credit Card 0% Installment Plan is a Double-edge Sword - Handle with Care Click To Tweet
Do you have any additional tips and recommendations? Feel free to share your tips and suggestions in the comment section below.