How to finance big purchases while considering your budget

Whether it's the holidays, a birthday, an anniversary or a realization in the moment that you need to buy something expensive, the price tag on big purchases can raise your financial blood pressure. How can you afford those purchases and still keep your budget in order?

Here's the good news: Pay-over-time financing can prevent budget blow-ups and get you the items you need — often at a considerable cost savings over credit cards. So if you need a new computer or to upgrade your cellphone, you owe it to yourself to learn more about this flexible financing option and how it could be your budget's best friend.

What is a pay-over-time financing plan?

A pay-over-time financing plan instantly transforms a big purchase into short-term installment payments. At the time of purchase, you’ll be presented offers based on your credit application, and you may be able to get a low annual percentage rate (APR) or even a 0% APR for a promotional period. Once you agree to the terms, your purchase is complete — you get the item now and make your payments as planned in the future.

From a new tile backsplash in your kitchen or updating your bike with new gear, the pay-over-time option is designed to make a wide range of large purchases fit more easily into your budget.

For example, say you're running your first half-marathon this year. To keep up with your training during winter and the spring rains, you want to buy a treadmill — but paying for it all at once might cut into your other critical expenses. With a pay-over-time plan, this big-ticket cost turns into a smaller monthly payment. Now, you can queue up your training program and get your miles in with less stress on your wallet.

What are the advantages to pay-over-time plans?

Pay-over-time financing, especially for larger purchases, can come with some notable benefits:

• Clear terms and costs. Pay-over-time plans lay out the payment terms upfront and may even come with attractive financing offers — 0% APR in some cases.
• Bite-sized payments. You can stick to your well-crafted budget by choosing a pay-over-time plan that aligns perfectly with your available cash each month.
• Financial flexibility. Pay-over-time plans can help you keep a bit more cash on hand, even if you can cover the purchase cost in full today. For some people, that's a nice bit of peace of mind.

How to factor paying over time into your budget

To make the most of your pay-over-time plan, ensure it fits your monthly budget. That's when understanding your plan's terms comes into play. Every plan has four features you need to know before finalizing a big purchase:

• Annual Percentage Rate (APR): The cost of borrowing money for your purchase
• Payment amount: What you'll pay each time a payment comes due
• Number of payments: The number of payments you must make until the purchase is paid in full
• Payment schedule: When you'll need to make each monthly payment

Say you're eyeing a $300 gaming console for your nephew's birthday coming up. You buy it at a 0% APR for six months, and the payment schedule is monthly. You'll make a $50 payment once a month six times. Easy.

Now, let's see how this gaming console could fit into a sample budget. Suppose you follow the 50-30-20 budgeting rule — where 50% of your income goes toward your monthly needs (housing expenses, bills, etc.), 30% goes toward your wants (like meals out and shopping) and 20% goes toward savings. If you bring home $2,500 per month, here's how your income breaks down:

• $1,250 in the "needs" bucket
• $750 in the "wants" bucket
• $500 into the "savings" bucket

You could buy that gaming console outright at $300 since you have the money in your "wants" budget to spare. But maybe your "wants" for the month also include some streaming service subscriptions, dining out for lunch a couple of times a week and a big weekend planned with your friends. Paying for all of that and the game system in cash could overfill your "wants" bucket for the month.

In this theoretical case, using the pay-over-time plan at 0% APR and only $50 per month gives you some breathing room. Not only does your nephew get his gaming console, but you get the reassurance that it and your other wants are covered by your budgeted cash rather than having to charge anything to a credit card.

Using Citizens Pay® for large purchases

If you think that pay-over-time financing could be a powerful tool for your finances, you may want to consider using Citizens Pay for an upcoming bigger-ticket purchase. If approved, you'll be granted a Citizens Pay line of credit for that retailer. As you make payments on that item, your available credit replenishes for future purchases.

Applying for Citizens Pay is simple. During the checkout process at a partner merchant, you'll select Citizens Pay and be guided through a short application. Approved customers get to see their terms up-front before finalizing their purchase. Then, you can easily manage your Citizens Pay plans and make payments through the online dashboard or the mobile app.¹

Partner merchants include leading retail, home improvement, travel, electronics, and health and wellness brands — because they know that flexible financing is a major plus with customers. Following is a list of Citizens retailer partners:

Home improvement

• Bedrosians Tile & Stone

Health and wellness

• Trek
• Echelon
• Peloton
• Horizon Fitness

Electronics

• Upgrade+ from Best Buy
• Xbox All Access
• Microsoft
• Cox Mobile

Fine jewelry

• Valliani Jewelers

Travel

• ASAP Tickets

So, if you're ready to spread out the cost of buying something expensive over time, learn more about Citizens Pay — a financing solution that can help you fit life's bigger purchases comfortably into your monthly budget.