Credit Card Financing – From Installment Plans to Low Interest Credit Cards

Credit card financing is a feature available with some credit cards that allows users to spread the cost of a purchase over time rather than paying it off in full all at once. It often takes the form of an installment plan that charges a small fee or a low interest rate instead of the standard purchase interest rate.

This article explains how credit card financing and installment plans work, when you should use one, and when you should try other options, like low-interest credit cards.

Credit card installment plans

As buy now, pay later plans have grown in popularity, issuers have made it easier to access credit card installment plans, which operate similarly. Your credit card isn't charged all at once – instead, a large purchase (typically $100+) is divided into smaller payments.

You decide how many months you need to make the payments, and you'll pay a small fee each month. This is why you're not charged interest.

For instance, you might have the option to repay a large purchase over 3, 6, 9, or 12 months.

Although the fees will be smaller for the longer-term installment plans, you'll pay more in fees over the course of paying off the purchase. Your monthly payment will be lower, though, because the total is spread over a longer period.

Residents of Quebec: Some credit card issuers won't allow you to set up installment plans, while others will charge a general interest rate rather than a fee. Some will only allow installments if no fee is required. The details you see here apply to the rest of Canada.

Some credit cards, like low-interest personal credit cards and business credit cards, aren't eligible for installment plans, so read your credit card's terms and conditions carefully.

Scotia SelectPay

For purchases of $100 or more, eligible Scotiabank cardholders can choose between terms of 3, 6, or 12 months. Rather than charging an installment fee, Scotia SelectPay applies a low fixed interest rate for the length of your plan – starting at 5.99% for a 3-month plan – with no installment plan fee.

Not all Scotiabank credit cards offer installment plans. Scotiabank Visa cards can set up a plan during checkout or after a purchase, while Scotiabank American Express cards are eligible for after-purchase plans only. Scotiabank Mastercards aren't eligible.

Eligible Scotiabank credit cards:

• Scotiabank Passport Visa Infinite+ Card
• Scotiabank Scene+ Visa Card
• Scotia Momentum Visa Infinite+ Card
• Scotiabank Passport Visa Infinite Privilege Card
• Scotia Momentum Visa Card
• Scotia Momentum No-Fee Visa Card
• Scotiabank Value Visa Card
• Scotiabank American Express Card (available after purchase)
• Scotiabank Gold American Express Card (available after purchase)
• Scotiabank American Express Platinum Card (available after purchase)

American Express Plan It

American Express offers installment plans for purchases over $100 with Plan It. This is not available everywhere – Amex credit card users in Quebec, Nova Scotia, Nunavut, and Prince Edward Island are not eligible for installment plans with American Express.

Amex Plan It charges a fee spread out over your payment plan. The company doesn't disclose the fee, which will vary based on your actual purchase. Purchases must be at least $100 to qualify, and you can spread out your payments over 3, 6, or 12 months.

Eligible Amex credit cards:

• American Express Cobalt Card
• SimplyCash Card from American Express
• SimplyCash Preferred Card from American Express
• American Express Green Card
• American Express Gold Rewards Card
• American Express Essential Credit Card
• Marriott Bonvoy American Express Card
• American Express Aeroplan Reserve Card

BMO PaySmart

If you make a purchase of at least $100 with a qualifying BMO credit card, you can set up a 3, 6, or 12-month payment plan through BMO PaySmart.

With any of your BMO PaySmart plans, you'll be charged a fee of up to 1% of the purchase amount for each month of the plan. For instance, if you make a $600 purchase, you'll be charged $6 each month.

Most BMO cards qualify for BMO PaySmart plans.

Eligible BMO credit cards:

• BMO CashBack World Elite Mastercard
• BMO eclipse Visa Infinite Card
• BMO eclipse Visa Infinite Privilege Card
• BMO Ascend World Elite Mastercard
• BMO CashBack Mastercard for students
• BMO CashBack Mastercard
• BMO VIPorter World Elite Mastercard

CIBC Pace It

The CIBC Pace It installment plans work just a little differently from the other big bank plans. Instead of simply paying a small fee each month of your payment plan, you'll also pay a one-time installment fee of 2% of your purchase amount.

Plan lengths are also a little different. Select from the following lengths at the following interest rates:

• 6 monthly payments at 6.99%
• 12 monthly payments at 7.99%
• 24 monthly payments at 8.99%

As with other plans, the purchase amount must be at least $100.

Almost all CIBC credit cards except the CIBC Select Visa Card and the Fido Mastercard qualify.

Eligible CIBC credit cards:

• CIBC Aventura Visa Card
• CIBC Aventura Gold Visa Card
• CIBC Dividend Visa Infinite Card
• CIBC Dividend Platinum Visa Card
• CIBC Aventura Visa Infinite Card
• CIBC Aeroplan Visa Card for students
• CIBC Dividend Visa Card for Students

MBNA Payment Plans

With MBNA Payment Plans, you can break a purchase of at least $100 into 6, 12, or 18 months. With a 6-month plan, you'll pay a 4% one-time fee, a 6% one-time fee with a 12-month plan, or 8% with an 18-month plan.

All MBNA credit cards except those with interest rates of 12.99% or lower are eligible for MBNA Payment Plans. Take a look at a few of your best options.

Eligible MBNA credit cards:

• MBNA Rewards World Elite Mastercard
• MBNA Rewards Platinum Plus Mastercard
• MBNA Smart Cash Platinum Plus Mastercard
• MBNA Smart Cash World Mastercard

TD Payment Plans

TD owns MBNA, so it should be no surprise that TD's installment plans work exactly like MBNA's.

On credit card purchases of more than $100, you can pay a lump sum fee depending on your term length:

• 6 months – 4%
• 12 months – 6%
• 18 months – 8%

All TD credit cards are eligible unless they have an interest rate of 8.99% or less.

Eligible TD credit cards:

• TD Aeroplan Visa Infinite Privilege Card
• TD First Class Travel Visa Infinite Card
• TD Aeroplan Visa Infinite Card
• TD Cash Back Visa Infinite Card
• TD Platinum Travel Visa Card
• TD Cash Back Visa Card
• TD Rewards Visa Card
• TD Low Rate Visa Card

Low-interest credit cards

Low-interest credit cards are an excellent alternative to credit card financing and/or installment plans. With these, every purchase you make is subject to a lower interest rate than what most credit cards typically offer. Charging a big purchase to a low-interest credit card might actually be cheaper than paying a credit card's installment fee.

Here's a summary of the best low-interest credit cards in Canada:

Many of these cards also have balance transfer promotions, which can help you pay down credit card debt a little faster.

Installment plans vs. low-interest credit cards

Comparing your options for your specific purchase and credit card is the only way to determine the most financially savvy choice.

Here's an example. Say you make a $1,000 purchase you'll pay off over 3 months. You could carry the balance on a low-interest credit card, or convert it into a 3-month Scotia SelectPay installment plan at 5.99%. Here's roughly what each would cost:

• Low-interest credit card: Carrying the balance on a low-interest card (say, 12.99%) and clearing it in 3 months works out to about $340.58 per month, or roughly $22 in interest.
• Scotia SelectPay installment plan: The same $1,000 on a 3-month SelectPay plan at 5.99% – with no installment fee – works out to about $336.67 per month, or roughly $10 in interest.

In this example, the installment plan is the cheaper option. But that flips the moment your card's interest rate drops below the SelectPay rate, so it's always worth running the numbers for your own card and purchase.

Store credit cards with financing

A few stores in Canada offer credit cards with special financing options. Here are 2 major ones:

Home Depot

The Home Depot Project Loan card comes with 0% financing for the first 3 months. If you haven't paid for your purchase in full by then, you'll still get a low rate of 7.99% for the next 12 or 60 months, depending on the purchase amount. Just be aware that the low 7.99% interest rate is reserved for people with great credit scores, and that your APR could range from 7.99% to 15.99%.

Canadian Tire

All Canadian Tire credit cards offer no fee or interest financing on purchases of $150 or more at any Canadian Tire store (including Sport Chek and Mark's) for 24 months – all you have to do is pay with your Canadian Tire Mastercard. The cashier will typically ask if you want to take advantage of the offer, but if not, ask for it.

FAQ

What is credit card financing?

Think of credit card financing as a form of personal loan. You typically make a large purchase with your credit card, then set up an installment plan to divide the amount into smaller monthly payments, and you'll pay a small fee (instead of paying interest for months or years).

What credit cards offer financing?

Just about all the big banks now offer credit card financing for the majority of their personal cards and even a few of their business credit cards. The exceptions tend to be low-interest credit cards, since these already save cardholders money on fees.

What are credit card installment plans?

Credit card installment plans let you split a large purchase into fixed monthly payments, typically without interest. Instead of interest charges, you pay a one-time or a monthly plan fee to set it up. For big purchases that would take months to pay off, installment plans can work out cheaper than carrying a balance.

Are there any BMO card installment plans?

All BMO credit cards give you the ability to set up installment plans through BMO PaySmart. As long as your account is in good standing, you can split any purchase over $100 into equal payments over 3, 6, or 12 months for a set fee.