Instalment credit cards

The total amount of each purchase is deducted from your available credit limit. For example, if you have a $10,000 credit limit on your instalment credit card, and you start two new instalment plans, one for $2,000 and one for $1,500, you will have only $6,500 credit still available, even though you may see only the monthly repayments, not the full purchase amount, on your credit card statement.

As you make your monthly repayments, your available credit will increase by the amount of the repayments made (unless you make further purchases).

You will typically be required to call customer service to arrange interest-free instalment payments on large purchases, either before you make the purchase or immediately afterwards. You may also need to complete an application form. A few cards offer an automatic trigger that splits large individual purchases into instalments repayable over 3-6 months, so you don’t need to make any special arrangements.

It depends on the card. The higher the cashback or other attached benefits, the higher the annual fee will be.

Annual fees start at $0 (yes, a free card) and rise to around $600. Cards with lower annual fees often waive the fee for the first one or two years. Other cards offer an annual fee rebate in every year where a spending target (e.g. $25,000) was reached in the previous year.

There may be no limit to the number of purchase transactions, but there may be a limit to the number of instalment plans you can have at any one time.

For example, the card may have a limit of six instalment plans on the card at any one time. If there was only one transaction in each of these instalment plans (e.g. wedding + honeymoon + car deposit + furniture purchase + kitchen appliance purchase + computer purchase) then the maximum would be reached in six transactions.

But some instalment credit cards allow you to combine a number of transactions into one instalment plan, after the purchases have been made. There may be a limit on the number of transactions allowed in each instalment plan (e.g. a maximum of 10 transactions per plan) but this would still mean that you could have a large number of transactions being repaid in instalments.

You will usually be charged a fee of $100-$150 if you want to do any of these things.

An instalment credit card is a bit like a personal loan, in that it gives you access to cash for large purchases which you can repay in monthly instalments over a longer period (e.g. 12 months). Unlike a personal loan, you don’t have to re-apply for a new loan when you’ve paid off the old one. The credit limit on your instalment credit card remains available for your use. And also unlike a personal loan, you won’t have to pay interest charges on the balance outstanding.

Not all instalment credit cards offer a cash rebate, but for those that do, it’s a percentage cashback on your instalment credit card spending. Depending on which card you choose, it may be a percentage rebate on all spending (e.g. 0.5% cashback for the first $1,000 spent, 1% cashback thereafter) or on a specific type of spending (e.g. 5% cashback on online and contactless purchases). Some cards have unlimited cashback, while others have a monthly cap (e.g. $125 per month).

Again, repayment periods vary. But generally speaking, transactions below $1,000 can be split into up to 12 instalments, while transactions over $1,000 can be split into up to 24 instalments.

The amount varies from card to card. Some cards allow amounts of as little as $100 to be split, while other cards have a $500 minimum.

Most instalment credit cards have a transaction processing fee. An amount generally between 1.5% and 5% of the purchase price is added to the amount of the purchase and forms a part of your balance owed. Further processing fees may be charged for splitting large purchase amounts into repayment instalments. Longer repayment periods may attract a higher processing fee.

Some cards offer air miles (e.g. 3 miles per $1 spent). Others offer a discount on fuel purchases (e.g. 16% discount at a specific brand of petrol station) or free travel insurance, or airport lounge passes, or dining, hotel and entertainment privileges.

No. instalment credit cards have a 0% p.a. interest rate (provided you always pay your instalments on time). Card issuers recover their costs and make a profit via a combination of the annual fee, transaction and payment plan processing fees and fees charged to merchants.

However, interest may be charged on overdue balances if you miss a repayment, or pay late.