How it works Credit card installments? Understand!

If you have a credit card or are expecting one, know that you can use your card for both cash and installment purchases. This option makes paying bills easier.

That's why we've gathered in this article all the information you need to know how credit card installments work and how you can do it safely.

Follow the article and find out more.

How does a credit card purchase work?

To better understand credit card installments, you need to understand how a purchase you make with your card works.

Essentially, it's a financial instrument that allows the holder to make purchases without needing cash. Instead, the holder pays for their purchases at the end of the month, in a single bill.

When you make a purchase with a credit card, the first step is to enter your card number, expiration date, and security code. This information is required so the store can verify that the card is valid and has available credit for the purchase. It's usually verified when you swipe your card through the terminal.

Then, when you swipe your card through the card reader, the store sends this information to the credit card company, which authorizes or denies the purchase. If there's available credit, the company releases the purchase amount to the store and issues a receipt to the cardholder.

The purchase amount is added to the cardholder's bill, which is due at the end of the month. If the cardholder chooses to pay in installments, the amount will be split into several installments.

What about installment purchases on a card?

Credit card installment payments are an option offered by many stores and card companies. By choosing this payment method, the cardholder divides the purchase amount into several installments, which can be interest-bearing or interest-free, and are paid over the following months.

The number of installments and interest rates may vary depending on the store and credit card provider, but generally, the higher the number of installments, the higher the interest rate. Therefore, it's important to check the installment terms before opting for this payment method.

So, in a simple way, the total purchase value is divided by the number of installments you will buy and you pay that amount per month.

For example, an electronic product purchased at a store costs R$1,500.00 in cash. You have a few options depending on the store and location:

• Payment by credit in cash: you will pay the total amount of R$ 1,500.00 on your next invoice.
• Interest-free credit card installment payments: Some stores offer interest-free installment payments. Let's say you pay in 10 installments. Over the next few months, you'll pay R$ 150.00 on each invoice until you reach 10.
• Card installment payments with interest: You can pay in installments, and the store or credit card company will charge interest on your account. In this case, you should check to find out the interest rates. In our example, let's say you have the following option: pay in 4 interest-free installments of R$$ 375.00 or in 10 installments of R$$ 162.00. In the latter case, with interest, the total amount will be R$$ 1620.00.

Why pay for a purchase in installments on a credit card?

There are several situations in which paying for a purchase in installments with a credit card can be a worthwhile option. Here are some of them:

• When it comes to a high value: if the purchase value is high and you don't have the cash available to pay in full, paying in installments can be an alternative to avoid compromising your entire budget at once.
• When you need the product and can't pay in cash: If you're purchasing a durable good, such as a home appliance or piece of furniture, and you can't afford to pay in cash, paying in installments can be an option so you can enjoy the product while you pay.
• When the store offers promotions: Stores often offer promotions for installment purchases made with credit cards, such as discounts or lower interest rates. In this case, it may be advantageous to pay in installments to take advantage of the promotion.
• When you have good financial planning: If you already have adequate financial planning and know you can pay the installments without compromising your budget, paying in installments can be an option to give you more flexibility in your payments.

In addition to these situations, there are some advantages to paying for a purchase in installments with a credit card. Here are some of them:

• Payment flexibility: by paying in installments, you can divide the purchase amount into several installments, which can be more convenient for your budget.
• Accumulating points and miles: Depending on your credit card provider, you can accumulate points or miles with each installment purchase, which can be advantageous for those who enjoy traveling or exchanging points for products and services.
• Greater purchase security: when purchasing with a credit card, you have the security of being able to dispute the purchase in case of problems with the product or delivery.

Therefore, when paying in installments on your credit card, it is important to keep in mind that this can be a good solution as long as you plan your card usage well.

Types of installments

It's important to know that there are basically two types of credit card installment plans. As mentioned above, you can pay for purchases in interest-free or interest-bearing installments.

See more details about each of them:

Interest-free installment purchase

Paying in installments on a credit card without interest can be a good idea for those who want to buy something and want to take advantage of the benefits of splitting the cost without having to pay an extra fee.

In general, there are some situations where you will be able to pay in installments on your credit card without interest:

• When a store offers a promotion where you can buy interest-free: Especially in large stores, you may have specific promotions for interest-free purchases. It's common to find furniture, smartphones, TVs, and other devices with specific terms and conditions for up to 24 interest-free installments. In this case, you usually have to use the store's card and follow certain rules.
• When you are part of a store points or benefits program and thus have the advantage of interest-free payments.
• When it's a lower-value purchase or a smaller installment plan. In this case, your credit provider may allow you to purchase interest-free.

Therefore, it is best to analyze the purchase before making the payment and you can have the amount paid in installments on your credit card without interest.

Installment purchase with interest

Just like interest-free purchases, depending on the situation in which you make the purchase, you may pay interest on your credit card installments.

The conditions will depend on several factors:

• Credit card company: Some credit card companies charge interest on all purchases, even those paid in cash. These are called "credit card fees," which may be passed on to you at the time of purchase.
• Credit card installment payments may incur interest depending on the number of installments and the store's terms and conditions. In general, the more installments, the higher the interest you'll pay.

Installment payments with interest will make you pay more for your purchase, but it can allow you to buy a product immediately and pay according to your terms.

How do I make a purchase in installments using my card?

See the step-by-step guide on how to make a purchase in installments using your credit card:

1. Choose the product you want to buy: choose the product you want to buy in the physical or virtual store of your choice.
2. Confirm the installment conditions: Check the store's installment terms, such as the maximum number of installments and the applicable interest rate. This will help you get a sense of how much you'll pay in total.
3. Choose your credit card: Choose the credit card you want to use to make the purchase. Make sure it has enough credit to pay in installments.
4. Enter the payment method: When completing your purchase, choose the installment payment option on your credit card.
5. Set the number of installments: Choose the number of installments you want to divide the purchase price into. Remember to check the total amount you'll pay, including interest, to ensure it fits your budget.
6. Enter your credit card details, if purchasing online, or insert the card into the card reader to make the payment. In the latter case, you must enter your password.
7. Confirm purchase: confirm the purchase and wait for approval from the credit card operator.
8. Follow the installments: Starting next month, the installment amount will be charged to your credit card statement. Keep track of your installments and make sure you can pay without compromising your budget.

It's worth remembering that you should check the terms and conditions of the company where you're going to make purchases to see if you can pay for purchases in installments on your card.

How can I pay off installments in advance after purchase? Is it possible?

If you purchased a product and won't be able to pay the bill, you have a few options to postpone the installments of the purchase, such as paying the minimum amount on your credit card bill or paying in installments.

After purchasing, you have access to all transactions carried out with the credit provider, including payments.

If you want to know a little more about the subject, we made a post about it partial payment of the invoice and there we explain in more detail how to postpone payment of the amount being charged to your card.

Buy in cash or installments?

When making a purchase, many people wonder what is better: paying in cash or using installments on a credit card?

The answer to this question isn't so simple and depends on a number of factors. You should analyze the purchase value, your payment terms, and the store's terms and conditions for installment payments.

Based on all these factors, you should review your financial plan and choose the best option. This way, you'll be able to make the purchase and pay the installments with greater peace of mind.

Frequently asked questions

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