Credit Card Installment Payments: The Hidden Trap You Need to Know About – A Lawyer’s Warning
1. Why should you avoid credit card installment payments? Disadvantages
In recent years, the number of people using credit cards in various aspects of daily life has increased, and among them, there are quite a few people who use credit card installment payments.
Credit card installment payments are the number of times you pay the amount you have paid by credit card.3 or more timesThis is a method of paying in multiple installments.
Credit cards can be used for one-time payments, two-time payments,Installment paymentsThere are payment methods with different characteristics, such as one-time bonus payments and revolving payments.
You can choose the number of payments you want from these payment methods, so you can pay at a pace that is comfortable for you. This is convenient when it is difficult to make a single payment, such as when purchasing a high-value item.
However, there are some unexpected drawbacks to paying by credit card, so you need to be careful.
There are some disadvantages to paying by credit card in installments:
- A division fee will be charged
- Spending too much because of small payments
- I don’t know how much I’ve paid back
Let’s take a look at each one.
1-1. Installment fees apply
The biggest drawback to using a credit card for installment payments is the fees that are charged.
If you use credit card installment payments,Depending on the amount used and the number of installmentsA split fee will be charged.
The actual fees vary depending on the credit card company. Below are the installment fees for major domestic credit cards.
Basically, if you pay in one lump sum or up to two installments, there is no installment fee.
The installment payment system involves deciding the number of installments and dividing up the amount you pay.A fee is added to the monthly instalmentIt looks like this.
Installment fees are charged from the third payment onwards, and the more installments you make, the more fees will be added, resulting in a higher total payment.
Be careful, if you make repeated installment payments because you don’t have enough cash on hand, you may end up paying large fees.
1-2. Spending too much because each payment is small
The second disadvantage of installment payments is that because the amount of each payment is small, you may think, “I still have some money this month,” and end up paying more.It’s possible to overuseThat is it.
If you set rules for yourself, such as not using other installment payments once until you have paid off the previous amount, you can avoid the risk of overspending.
Installment payments are a way to postpone full repayment by dividing the payment into multiple installments. It is important to use them in a planned manner, with a view to the full repayment.
1-3. You lose track of how much you’ve paid back
When you use a credit card to make installment payments, it’s often difficult to know how much you have owed.
Generally, you can set the number of installments for credit card payments to be made in installments ranging from 3 to 36, so if the payment period is extended, it is easy to forget when, what, and how much you spent.
1-4. It affects credit card application
If you make frequent installment payments on your credit card, your credit card bills willhave a negative impact on the reviewThere are times when this happens.
The remaining balance of installment payments is still debt. Credit card usage history is also recorded by credit information agencies such as the Japan Bankers Association, so it will give a bad impression during the screening process.
When applying for a new credit card, please be aware that if you have any outstanding balance or have a history of late payments within the past five years, you may be rejected.
If you plan to apply for new credit cards in the future, installment payments will likely be a disadvantage.
2. Benefits of using installment payments with credit cards
There are three main benefits to using a credit card for installment payments:
- You can buy it even if you don’t have money
- Choose the number of payments
- Flexible payment options based on bonuses and other extra income
Understanding and using it correctly can enrich your life, so let’s take a closer look.
2-1. You can buy it even if you don’t have money
A big advantage of credit card installment payments is that you can buy what you want right away, even if you don’t have the cash at the moment.
Even if you purchase a product you want, you don’t have to pay all at once because the payment will be divided into installments of your choosing starting from next month.
Using installment payments can be a great advantage if the item is limited edition, there is a possibility that it will sell out, or you can buy it in installments even though it is expensive.
2-2. Choose the number of payments
By using credit card installment payments, you can choose the number of payments that suit your financial situation.
Credit card installment payments are set from 3 to 36 installments, so you can adjust them to suit the amount of the product you are purchasing.
If you can freely choose the number of installments, you can continue making payments while adjusting it in conjunction with other loans so that it does not interfere with your lifestyle.
It is important to set installment payments at a frequency that will not disrupt your lifestyle.
2-3. Flexible payment options to accommodate bonuses and other special income
By using credit card installment payments, you can make flexible payments based on bonuses and other unexpected income.
Another benefit of installment payments is that you can change your payment method depending on the situation, such as paying in installments until you receive your bonus, and then paying in a lump sum once you receive your bonus.
Company employees who receive bonuses every six months and self-employed individuals who receive large income on a regular basis will also benefit greatly from the early repayment system, as they will be able to reduce installment fees.
3. What is installment payment? Explaining the difference between bonus payment and revolving payment
First of all, installment payments are a payment method in which you pay for a product or other item in three or more installments over two or more months. They are also called installment sales.
Installment sales are a method of buying and selling in which the price is paid in two or more installments over two months or more. For installment sales, a fee is charged if the minimum number of installments is three, but there is no fee for two installments.
In installment payments,Payment amount cannot be changedHowever, the advantage of making frequent payments is that you won’t have to worry about repaying even large purchases.
Additionally, installment payments are different from bonus payments and revolving payments.
The differences between them are shown in the table below.
Let’s take a closer look.
3-1. Difference between installment payments and bonus payments
Bonus payment is a method of paying your credit card charges in one lump sum during the next bonus period.
The difference between installment payments and bonus payments is the number of payments, as shown in the table. Installment payments can be set to between 3 and 36 installments, while bonus payments are limited to one installment.
In addition, regarding fees, while installment payments cost 12.0% to 15.0%, there are no fees for bonus payments.
If you receive regular bonuses in the future, you should make bonus payments, but if you can only pay in installments, you should use installment payments.
3-2. Difference between installment payment and revolving payment
Revolving payment is an abbreviation for revolving payment, and is used regardless of the amount or number of credit card transactions.Monthly payments will be fixedHere’s how it works.
The main difference between installment payments and revolving payments is that installment payments determine the number of payments, while revolving payments are a payment method in which you set the monthly payment amount. Payments continue regardless of the number of payments until the purchase price is paid off.
For example, if you set up your credit card to “pay 10,000 yen per month,” your monthly payment will be 10,000 yen even if you make a purchase worth 100,000 yen.
Things to be aware of with revolving payments are that fees are charged and it takes time to pay off the loan. If you use revolving payments repeatedly, your repayment amount may balloon, so be careful.
3-3. Difference between installment payment and two-payment
Two-part payment is a method of paying the usage amount in two installments. Half of the usage amount is deducted on each withdrawal date.
The main difference between installment payments and two-payment payments is the number of payments and whether or not there is a fee.
With installment payments, you make between 3 and 36 payments, but with two-payment plans, you only make two payments.
Some people mistakenly believe that two-payment installments are also installment payments, but this does not apply because installment payments are payments in three or more installments.
Also, while installment payments incur fees, there are no fees for two-payment. If you can make fewer payments, choosing to pay in two installments is a good idea.
4. Introducing a case study of installment payments through a simulation
Although installment payments have their downsides, they can also have significant advantages if used properly.
Here we will look at a simulation of each installment payment example.
4- Purchase a product worth 16,000 yen in three installments
4-2. Purchase a product worth 100,000 yen in 10 installments
4-3. Purchase a product worth 500,000 yen in 36 installments
5. Characteristics of people who make installment payments
There are three characteristics of people who make installment payments:
- I want to keep as much cash on hand as possible
- I want to get what I want right now
- I want to choose the monthly repayment amount and number of repayments and make planned purchases.
Let’s take a closer look at each one.
5-1. I want to keep as much cash as possible on hand
One characteristic of people who want to make installment payments is that they first want to keep as much cash as possible on hand.
Installment payments are basically a method of paying the total amount in specified installments, making it easier to have cash on hand compared to paying in a lump sum.
It can be said that the desire to keep as much cash as possible on hand leads to the behavior of purchasing on installment payments.
5-2. I want to get what I want right now
People who don’t have the cash to pay in one lump sum but want to get it now also tend to choose installment payments.
For example, if the amount of a large purchase, such as real estate such as an apartment or a house, a car, or high-end brand goods, exceeds 10 million yen, it will be difficult to purchase it in one lump sum.
By paying in installments, you can get a loan and buy what you want without having to pay in full. People who want something right away often choose to pay in installments.
5-3. I want to choose the monthly repayment amount and the number of repayments so that I can plan my purchases.
People who want to plan their purchases by choosing the number of monthly repayments also use installment payments. The advantage of installment payments is that you can choose the specific repayment amount and number of repayments and plan your monthly payments.
For example, before making a big purchase, it would be wise to consider your income and expenses and decide on a monthly repayment amount so that you can buy what you want without straining your budget.
6. When should you use installment payments?
There are two situations in which you should use installment payments:
- Purchasing expensive items
- When installment payments are covered
Let’s take a look at each one.
6-1.Purchasing expensive items
If you want to purchase an expensive item that is beyond your means or financial situation, it may be a good idea to use installment payments.
By making installment payments, you can spread out the burden of payment. Also, by deciding the number of installments, you can make a repayment plan, so you can repay without strain.
6-2. When installment payments are covered
In some cases, you may be able to get compensation for your purchased items by paying in installments. In such cases, there are benefits to using installment payments.
For example, if a product purchased on installment plans is damaged or lost, you may be eligible for compensation of 1 to 3 million yen.
However, the compensation details vary depending on the card company, so be sure to check in advance.
7. Installment payments won’t hurt your credit
In conclusion, installment payments will not damage your credit rating. However, be aware that there is a risk of your credit rating being damaged if any of the following apply to you:
- Repeatedly defaulting on payments
- Applying for a new credit card even though you still have an outstanding balance
Please be careful if you are in the above situation, as the credit card company will perceive you as untrustworthy, which will have a negative impact on your application and the granting of a cash advance limit.
8. Points to note when using installment payments
Here we will look at the points to be aware of when using installment payments. There are three points to be aware of to avoid regretting your installment payments.
- Make a repayment plan and use it
- Do not split too many times
- Don’t miss the timing of your installment payments
Let’s take a closer look at each one.
8-1. Make a repayment plan and use it
Before you start using installment payments, it is important to have a solid repayment plan.
First, understand your monthly income and expenses and calculate your monthly repayment plan. Next, consider the product price and installment payment terms, and determine the repayment period and monthly payment amount.
By creating a repayment plan before you act, you can reduce the risk of having trouble repaying your debt in the future.
8-2. Don’t split too many times
When making installment payments, try not to make the number of installments too large.
Please note that the more installments you make, the more interest and fees you will pay, which will ultimately increase the total amount you pay.
Rather than increasing the number of payments, it is important to choose the appropriate number of payments based on your ability to pay and whether you can pay properly every month.
It would be wise to choose the minimum number of payments required.
8-3. Don’t miss the timing for installment payments
With installment payments, you may miss the opportunity to use them.
Installment payments are available at the following times:
- When checking out a product
- When changing the payment method on a website after purchasing a product
Installment payments are only available at the times mentioned above. Basically, stores assume that you will pay in full, so you must let them know in advance if you want to pay in installments.
9. The benefits of consulting and hiring a lawyer when you are unable to make payments or are in trouble with debt
There are three benefits to consulting and hiring a lawyer when you are unable to make payments or are in trouble with debt.
- Free yourself from collections and dunning
- A lawyer can do all legal work
- We can suggest the best way
Let’s take a look at each one.
9-1. Free yourself from debt collection and demands
If you ask a lawyer to help you with debt consolidation, the lenders will stop demanding payment and collecting the debt.
When a lawyer receives a request for debt restructuring, he or she will send a “notice of acceptance” to each lender informing them that the debt restructuring procedure will begin.
A notice of acceptance has legal effect, so once the lender receives it, they will no longer be able to demand or collect the debt.
Simply stopping the sending of collection documents and receiving collection phone calls can relieve you from mental stress.
9-2. A lawyer can do all legal work
Many people are unsure whether to consult a judicial scrivener or a lawyer when seeking advice on debt restructuring, but the scope of work that lawyers and judicial scriveners can handle is different.
Lawyers can basically handle all legal matters. In debt consolidation, you can be entrusted with all legal matters, such as preparing the necessary documents, negotiating with lenders, and representing you in litigation.
On the other hand, judicial scriveners are limited in the amount of money they can handle, and cannot handle procedures that require going through the courts, such as personal rehabilitation or bankruptcy.
9-3. They will suggest the best way to do it
In order to quickly resolve debt problems, it is important to choose the right debt consolidation method, as each procedure has different conditions and methods.
For example, the debt restructuring method to be chosen by a company employee with a stable income will be different from that of an unemployed person.
If you choose the wrong method, it may result in extended time, the procedure having to be redone, or debt settlement not being completed.
It is best to leave debt restructuring to legal professionals rather than taking it upon yourself.
Online legal consultation is also available. You can consult from the comfort of your own home.
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10. Frequently Asked Questions about Installment Payments
10-1.Is installment payment safe?
Yes, installment payments are safe. However, please be aware that if you use them without planning, you may have trouble repaying the loan. Make sure to create a solid repayment plan before using them.
10-2. Will I be charged interest if I pay in installments?
Yes, interest will be charged when you use installment payments. It is a good idea to know the interest rate in advance by considering the number of payments and the interest rate.
10-3.What are the advantages and disadvantages of installment payments?
The benefits of installment payments include being able to purchase products even if you don’t have cash and reducing the burden of payment.
On the other hand, the disadvantages include additional interest and fees, and the difficulty of repaying the loan if used unplanned.
10-4. What is the repayment period for installments?
The repayment period for installment payments varies depending on the product and contract terms. Generally, it can take anywhere from a few months to a few years. Make sure you understand the repayment period before using the service.
10-5.What are the fees for installment payments?
The fees for installment payments vary depending on the product, the number of payments, the credit company’s contract terms, etc. Be sure to check the fees before using the service.
10-6.What are the conditions for applying for installment payments?
You will need to clear your credit card limit and credit information. The conditions for applying for installment payments vary by credit card company, so be sure to check the conditions.
11. Summary
The advantage of credit card installment payments is that you can make large purchases even if you don’t have the cash, but since installment payments are still debt, you have to pay it back at a later date.
Before you are unable to repay the loan, it is important to fully understand how credit card installment payments work, as well as the advantages and disadvantages.
If you are having trouble paying off your credit card installments, please feel free to call us. We will suggest the best way to consolidate your debts.
At Legal Smart, we have a team of experts in debt problems and debt consolidation. We offer a free initial consultation. If you have any concerns, please don’t worry alone and feel free to contact us. If you have any concerns, please don’t worry alone and feel free to contact us.
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4 benefits of consulting a lawyer about your debt problems
Creditors will stop demanding payment By hiring a lawyer, harsh demands and collection from creditors will stop. This will reduce the mental burden and allow you to act calmly towards resolving the problem. Proposal of the best solution for your situation A lawyer will select the best solution for your situation from procedures such as voluntary reorganization, personal rehabilitation, and personal bankruptcy, and proceed with the procedure. This will allow for a smooth resolution. Save time and effort By hiring a lawyer, you can significantly reduce the effort required for debt reorganization procedures. Since a lawyer will negotiate and process the procedures on your behalf, you can focus on your daily life and work. Procedures can be completed without your family knowing Since a lawyer will be the liaison with creditors, you can proceed with the procedures without your family knowing. This allows you to solve the problem without worrying your family.
Legal Smart Law Firm
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Yosuke Minami, Attorney at Law, Ippo Law Office ■ Career
March 2004: Graduated from the Faculty of Law, Osaka University
March 2007: Graduated from Kansai University Law School
December 2008: Registered as an attorney (Osaka Bar Association)
December 2008: Worked at a law firm in Osaka
March 2021: Ippo Law Office established
I worked at a law firm in Osaka City, where I was in charge of a wide range of legal work, including civil litigation cases and criminal cases. In March 2021, I established the current Ippo Law Office, and provide services via the internet, mainly focusing on preventive legal work, such as checking contracts, document preparation, and legal advice for starting a business. I strive to provide legal services that are easy for everyone to use.