Many of us have turned to installment payment plans to budget large purchases such as furniture and expensive appliances. However, consumers are now opening up to the idea of using installment plans to pay for smaller everyday purchases, as well as travel.
Business intelligence firm Auriemma Group surveyed 800 adult debit cardholders to see how they felt about point-of-sale installment plans. They found that consumers who either exclusively use debit cards or prefer them over other payment methods were most in favor of using installment plans more widely.
While consumers are most likely to use installment plans on big-ticket items like electronics and furniture, nearly one-quarter of respondents said they have used installment plans to buy clothing while 17% said they’ve used the plans to pay for a shopping cart of items. According to the findings, 40% of debit card users said they would even consider using installment plans when making day-to-day purchases, such as groceries.
While 60% of debit cardholders said they find the plans attractive, many say they have not been given the option of spreading payments out via an installment plan and respondents have found online retailers more likely to offer installment plans than brick-and-mortar stores. In fact, just 28% of debit cardholders said they have been offered an installment plan when making in-store purchases, yet 45% said they have been offered the option to pay in installments online.
Of those who were given the option of paying via installment plan, 48% of those in brick-and-mortar stores took up the offer and 41% of those purchasing items online agreed to make partial payments.
While debit cardholders are most bullish about installment plans, credit cardholders also embrace the idea, the survey found. Only 17% of respondents who were credit cardholders said they were given the option to pay for something using an installment plan, but half of those — 51% — took the retailer up on the offer.
Consumers are also open to the idea of leveraging installment plans to pay for more extravagant vacations, research shows. In a survey of more than 1,000 respondents, payment solution provider Splitit Payments and Google Consumer Surveys found that more than half of the respondents would take more expensive trips if they could pay using interest-free monthly installments. Among those surveyed, 56% said they would spend more on flight tickets, 69% said they would plan trips further in advance and 53% would upgrade their hotel rooms or airplane seats if they could pay over time.
If you don’t have a lot of disposable cash, installment plans can help you pay for your purchases over time without going over your budget. Some may even consider using an installment plan as an alternative to buying items using a credit card. However, remember that installment plans will leave you with another bill and may lead to overspending. Also, pay attention to the details of the installment plan. For example, if the plan charges fees or interest, you should factor that into the total cost of the item and plan to pay the item off as quickly as possible. Finally, make sure the ability to make small payments on an installment plan doesn’t lull you into the false belief that you can afford something that would set you back financially over time.