How Do Credit Card Installment Plans Work in Canada?

If you plan to make a large purchase, using your credit card to make installment payments can be a practical idea.

It is a popular payment strategy, with the average Canadian carrying an average monthly credit card spend of almost $2,447 in the third quarter of 2022.

Banks such as CIBC, TD, and Scotiabank offer a range of payment plans that borrowers in Canada can enjoy.

These financial institutions provide several convenient ways to pay off big-ticket items on the terms you choose.

Read on and find out how to pay installments using credit card plans for your purchases.

What is a Credit Card Installment Plan?

A credit card installment plan is a payment plan wherein you pay for your purchases by making smaller monthly payments to your credit card company. This payment feature may come with your existing credit card.

You pay for it in regular, equal monthly payments that include a portion of the principal, interest, and fees, depending on the card issuer and your selected payment plan.

Different issuers like banks, merchants, and retail companies usually offer these plans.

How Do Credit Card Installment Plans Work?

Here is an installment plan example: You buy a new laptop that costs $1,200 and use your credit card to pay for it.

When you enroll in this purchase in a credit card installment plan, you agree to pay the amount of the item plus the interest and fees that may come with it.

Depending on the terms of your installment credit, you can pay back your purchase in multiple smaller monthly payments over a specified period.

If you go for a three-month installment plan, your credit card issuer will split your purchase of $1,200 into three equal payments of $400.

Your credit card company may also charge an installment plan fee, which depends on the purchase amount and your preferred repayment period.

If your installment plan requires a 2% fee on the purchase price of $1,200, then you need to pay an additional $24.

Thus, your total overall balance (purchase price plus installment fee) will be $1,224. It is divided into three months, resulting in a $408 monthly payment. This calculation assumes no other interest fees or charges with your chosen plan.

How to Pay in Installments Using a Credit Card

Credit card installments are similar to regular installments, wherein you spread out your monthly payments instead of making one lump sum to pay for your purchase. Depending on your credit card company, your installment plan may have 0% interest for some terms.

At the end of the billing cycle each month, your credit card issuer will send you a statement that details the following:

• The amount you owe them
• The minimum payment you need to pay; and,
• When your payment is due

If you pay the minimum payment rather than the entire amount, the remaining balance will roll over to the next month and accumulate interest. Once you agree to an installment plan and its conditions, you may be unable to change the terms.

Credit Cards That Offer Installment Plans

Below are some of the most popular credit card issuers that offer credit card installment plans.

Scotiabank SelectPay

Scotiabank offers installment plans for eligible credit card purchases through SelectPay, which is available on select cards and requires no new application or credit check. With SelectPay, you enjoy the following:

• No interest rate on your plan
• A low fee
• Fixed monthly payments
• More flexible payment options
• Benefits like rewards and insurance coverage

If you want to know how to pay Scotiabank credit card installment plans, enroll in this feature using these steps:

1. Choose SelectPay on the Scotia app.
2. Pick the eligible purchase you want to convert to a SelectPay plan.
3. Select your preferred installment payment plan (3, 6, or 12 months) and the applicable fees, and agree to the terms and conditions.

MBNA Payment Plan

An MBNA Payment Plan allows you to pay for credit card purchases of $100 or over with different terms. Except for cards with a 12.99% interest rate, all MBNA credit cards are eligible for this payment plan.

To pay MBNA credit card installments, you need to:

1. Select an eligible purchase for your plan.
2. Choose from three payment terms (6, 12, or 18 months).
3. Create a payment plan and accept the terms.

American Express Plan It

Plan It is a feature on the American Express card that enables you to pay your balance through equal monthly payments over a set period. Plan It is applicable for both small and large purchases.

The following are the steps to enrol in the AMEX installment plan:

1. Create this plan by entering an amount to put into your installment plan.
2. Choose between 3, 6, or 12-month term options.
3. Review and agree to the terms and conditions specified in your selected plan.

When you sign up for an American Express Plan It installment plan, the provider will charge a monthly installment fee instead of interest. You can determine this fee during the plan creation process.

CIBC Pace It

CIBC Pace It lets you pay off eligible credit card purchases of $100 or more through its different installment plans with lower interest rates at terms you choose. Setting up a CIBC installment plan does not require enrollment, approval or credit checks.

To set up CIBC Pace It, follow these steps:

1. Using an eligible CIBC credit card, create an installment plan via online or mobile banking.
2. Select a purchase eligible for installments. 
3. Choose an installment plan option (6, 12, or 24 months), a monthly payment, and, if applicable, a one-time installment fee.
4. Agree to the terms and conditions and create your CIBC credit card installment plan.

TD Payment Plan

TD Canada Trust offers the TD Payment Plan to turn credit card purchases of $100 or more into monthly payments with lower fees and no interest. TD business cards and purchases made on TD credit cards with an interest rate of less than 8.99% are not eligible for this feature.

To enroll in this plan, install the TD app, sign into it, and follow these steps:

1. Choose your credit card and tap on TD Payment Plans.
2. Select the eligible purchase you want to convert into a TD Payment Plan.
3. Pick a monthly plan (6, 12, or 18 months) and check the applicable fees.
4. Review the terms and conditions and confirm your chosen payment plan.

Triangle Mastercard Financing

Triangle Mastercard credit card offers cardholders the option to pay for qualifying in-store or online purchases of $150 or more in 24 equal monthly payments. You can use your Triangle credit card at participating retailers.

You can enjoy the no-fee and no-interest features if you pay the minimum amount in full by the statement date. Triangle’s Mastercard Equal Payment Plans work by:

1. Deducting your total purchase amount from your available credit on your card, and
2. Dividing the purchase amount into 24 equal monthly payments.

Brim Installment Pay

Brim Financial’s Installment Pay allows you to pay for credit card purchases over $500 in smaller monthly payments on your chosen terms. Using the embedded Installment Pay on Brim’s portal and app, you can choose between 12, 16, 20, and 24 months.

Installment Pay does not charge interest on installments but requires a fixed installment fee of 7% of the overall purchase price. There is also a monthly processing fee of 0.475% of the original purchase price. To avail of this feature:

1. Go to Brim’s portal or open the Installment Pay app.
2. Select an eligible transaction.
3. Choose an installment option.

Pros and Cons of Credit Card Installment Plans

Credit card installment plans come with both good and bad. Learning the pros and cons will help you make sound financial decisions about your credit card purchases.

Pros

• Provide the ability to make a large purchase and pay for it later
• Flexible terms, lower interest rates
• Purchase protection
• Easy to sign up or enrol in
• Convenient installment plan options
• Provides a valuable record of your spending
• Help build a good credit history
• Includes perks such as bonuses, rewards points, cash back, insurance, and frequent-flyer miles
• No interest, no fees, and no credit checks (depending on the credit card issuer)

Cons

• Fees and interest charges
• Can lead to impulsive spending and unplanned purchases
• Potential to make purchases you cannot afford
• Can result in using up your credit limit
• Late payment fees
• Long-term commitment

Should You Use a Credit Card Installment Payment Plan?

A credit card installment plan helps you make large purchases now and pay for them later at a pace you can manage.

But before using it, read the fine print and take all payments and fees into account to determine whether or not it will save you money.

Ask yourself first if you can commit to making the scheduled payments and if you have the means to keep up with the monthly obligation. If you miss making payments, your account may default and affect your credit score.

But if you use this installment payment plan responsibly, you can benefit from the flexibility and convenience it offers when paying for large purchases.

The key is to buy what you can afford, choose a suitable monthly plan, and pay off your credit card balance at the end of each billing period.

Alternatives to Credit Card Installment Plans

Some alternatives to using a credit card installment plan include getting a personal loan or using a low-interest credit card.

You can use LoanConnect to find a personal loan that meets your needs.

And here are the best low-interest credit cards with significantly lower purchase APRs. A top option is the Scotiabank Value Visa.

FAQs

How are credit card installments calculated?

These are calculated by taking the total payment plan amount, fees and interest, if any, and dividing it by the plan’s number of months. For example, a purchase worth $500 enrolled in a 6-month payment plan with fees amounting to 5% will have a monthly installment of $87.50.

• Payment plan fee = $500 x 5% = $25
• Credit card balance = $525
• Monthly installment = ($500 + $25) / 6 months = $87.50

Will credit card installments affect my credit score?

Unless you max out your card or miss a payment, using a credit card installment plan will not affect your credit score. When you pay your monthly installments on time, it will improve your credit score.

Is it better to pay upfront or in installments?

Paying upfront makes more sense if you can afford it, and it is cheaper in the long term than paying in installments. If you do not have enough money upfront, installments would be a viable option, especially if it is something you can confidently work into your budget.

What is the minimum payment on a $5000 credit card balance?

Minimum payments typically depend on your selected monthly plan and the APR of your credit card. The quickest way to determine this is to use a credit card payment plan calculator.

Card issuers may base it on a flat minimum payment or a small percentage of your credit card balance, whichever is higher.

Related: Best Business Credit Cards in Canada.