By E. Napoletano | Citizens Contributor
You're finally buying that big-ticket item you've wanted. Maybe you've saved and budgeted enough to pay cash, or maybe you're planning to put it on a credit card. But as you go through the checkout process, you glance at the other methods of payment available and wonder if another payment type would make more sense.
To help you feel confident you're choosing the best way to pay for a large purchase, it helps to understand the many options. From flexible choices like pay-over-time financing and credit cards to cash, debit cards and smartphone apps, here are details about each to help you match the best payment with your purchase.
Pay-over-time financing offers you a way to break large purchases into affordable payments, usually with low or no interest and fees. With this method, the purchase price transforms into installment payments. You'll make fixed payments for a fixed term, and you'll know the full total before you seal the deal.
Here's how it works: Say you have your eye on a new laptop or the latest gaming console, but buying it now would drain your savings. Choosing pay-over-time financing at checkout makes the large purchase affordable with a set number of payments over time rather than all at once. This helps keep your savings intact in case you need it for an emergency.
The key to pay-over-time financing success is to ask yourself if payments would comfortably fit into your monthly budget for the number of payments needed for a full payoff. If you follow the 50/30/20 budgeting rule, your wants should take up no more than 30% of your income.
Pay-over-time could be a great way to pay when:
Potential drawbacks of the pay-over-time option include:
You may be aware of other methods of payment, but it helps to put some thought into when each makes the most sense to use. Here's a deep dive into the common ways to pay plus the pros and cons of each when it comes to major purchases.
Cash will likely never go out of style. It's a great way to pay for the smaller things you need quickly and may mean an immediate discount at an in-person point of sale if the merchant charges fees for using a card. It's widely accepted around the world — though not at online checkouts.
Paying cash for big purchases could be ideal when:
Potential drawbacks of paying cash for large items include:
Debit cards are essentially a convenient form of cash. It may be easy for you to have enough in your checking account or move money to it from your savings and then swipe, tap or enter your numbers to make a big purchase. You don't have to worry about interest charges. You need only make sure you have enough money in your account.
A debit card can be a smart way to pay for a large purchase when:
Potential drawbacks of using a debit card include:
The number of digital payment methods accepted by retailers grows by the year. Apps can let you complete a large purchase with one-click convenience and usually encrypt your payment information to shield your financial information from fraudsters. However, these digital payment methods aren't accepted everywhere, and they tend to not come with flexible payment terms.
Payment apps can be useful for big purchases when:
Potential drawbacks of payment apps include:
Credit cards are powerful financial tools that could accentuate your finances in multiple ways. Borrowers could use them to build credit and establish a responsible payment history, boosting their credit scores along the way. Many cards also offer points, miles or cash back, which take your big purchase and turn part of it into redeemable rewards you can apply to decrease the cost of future purchases.
A credit card could make sense to pay for big purchases when:
Potential drawbacks of using a credit card include:
Pay-in-four methods of payment are showing up more at online checkouts. The way they work is not entirely unlike pay-over-time methods. A third party intervenes to split your total purchase into four payments that are generally due weekly, bi-weekly or monthly. These plans could be easy to qualify for and show you exactly what you'll pay and how often, but they may not be companies you know or have a relationship with and may have terms you need to review closely to avoid paying surprise costs.
A pay-in-four repayment plan could be a good choice for a big purchase when:
Potential drawbacks to the pay-in-four method include:
Citizens Pay pay-over-time | Cash | Debit card | Smartphone app | Credit card | Pay-in-four plan | |
Purchase limit | May cover the purchase price and may offer an open line of credit | Your cash on hand | Your checking account balance | Your linked bank account balance or linked credit card limit | Your credit card limit | Usually only covers the purchase price |
Flexible terms | Ability to choose or given a term and payment that fits your budget | No | No | No | Technically an unlimited repayment timeline but subject to interest | No |
Flexible payments | Yes (choice of payment based on terms offered) | No | No | No | Minimum monthly payment is usually required, or fees and interest may be charged | No |
Fees | Generally no fees | No | Vendors may charge a transaction fee | Vendors and the app may charge transaction fees | Some cards charge annual or monthly fees; vendors may charge a transaction fee | Generally no fees |
Interest charges | Low or 0% APRs for qualified consumers | No | No | No | Yes, if a balance is carried forward month to month | Interest rates vary but can be low or 0% |
Whether you're shopping for a stylish bedroom suite, some wicked ski gear or just the perfect TV for game day, it helps to know that you have financing options, and that's where Citizens Pay can help. It's a pay-over-time financing option that combines the best features of pay-over-time and credit card financing: a line of credit and longer financing terms for life's bigger expenses.
Say you just scored your dream job and salary. As you revamp your budget with your updated income, you realize that you can finally afford to upgrade your sofa. But instead of laying down a hunk of cash or charging it to a high-interest card, you can visit one of the Citizen Pay retail partners and select Citizens Pay at checkout. You'll go through the approval process on the spot, then you simply select the payment and term options that fit your budget to complete the purchase. You'll then have a new job and a new sofa to celebrate.
With Citizens Pay, you get a credit line that can be used at the retailer with whom you opened your Citizens Pay Line of Credit Account. This means you won't have to reapply every time you make a purchase at that retailer. And our retail partners often have terms you won't see from a credit card company. So while you might find yourself shopping at a moment's notice, you won't have to pay dearly for last-minute financing. Plus, you'll be dealing with people you know and have convenient anytime access to your account. You simply log into the Citizens Pay online portal or mobile app1 and make a one-time payment or set up auto pay.
When the time comes to make a large purchase, it's good to know that you have options. You may find that cash or credit is the right fit, or you may find that pay-over-time is the financing solution you've been looking for.
Stretching out your payments for big-ticket items over time can get you what you want or need at payments you can afford and without excess fees or high interest. With pay-over-time options like Citizens Pay, you can have the peace of mind that the financing you need is readily available from a bank you already trust.
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1 Wireless carrier, text and/or data charges may apply.
Disclaimer: Views expressed may not necessarily reflect those of Citizens. The information contained herein is for informational purposes only as a service to the public, and is not legal advice or a substitute for legal counsel, nor does it constitute advertising or a solicitation. You should do your own research and/or contact your own legal or tax advisor for assistance with questions you may have on the information contained herein.