Credit cards with installments are useful if you are planning larger purchases that you cannot pay in one amount. You will be kept in a separate account to which you will make the monthly installments.
The disadvantage of credit cards with a partial payment function is the comparatively high interest that you have to pay to use the credit limit.
Use the installment facility of a credit card
Originally, all credit cards were equipped with a partial payment function. This function gave the practical money card its name. Depending on your credit rating, the card-issuing institution will give you a credit line. You can use your credit card in this context. Billing takes place once a month.
Many institutes choose a date between the 20th and 30th of the month. On this day, the amount used is due.
You can choose to pay off the full amount or choose to pay in installments. When paying the entire amount, there is often no interest. If you use the installment payment option, you will have to pay interest on the amount used.
The amount of the installment payment that you make monthly is up to you to a certain extent. Many credit institutions define a minimum rate that should go into your account every month. The minimum rate can be set at USD 100 per month. Other credit institutions only set the minimum rate at USD 10 or 15. Sometimes a certain percentage of the amount used is requested as a partial payment. The percentage can be set at 3%, 5% or 10% of the total. A combination between minimum rate and a minimum percentage is also possible.
For example: You have used up USD 300 from your credit limit and have to repay 3% of the loan amount, the minimum amount being USD 15. In this case you have to pay 15 USD, because the 3% only results in an amount of 9 USD. This would fall below the prescribed minimum amount.
The installment facility on your credit card has another advantage. You are required to pay in installments once a month. However, you are free to make further payments. For example, you can deposit money several times a month if you want to. With each deposit you reduce the amount used and thus the interest that is due for the claim.
Interest for using the credit limit
You must pay interest for each use of the credit limit. The interest is usually due once a month together with the credit card statement. Although the key interest rate of the Cream bank remains at a low level, this has so far not had a positive effect on the interest rate for credit cards with a partial payment function.
They are sometimes more than twice as high as the interest charged on installment loans.
The average interest rate is between 12% and 15%. Only a few financial institutions offer a partial payment function at interest rates that are well below 10%. For this reason, these credit cards are among the most expensive financing options that banks and savings banks offer their customers.
Special features when choosing a credit card
Before you sign a contract for a credit card with a partial payment function, you should carefully study the terms of the contract. Please note that you do not have to pay an annual fee for the credit card. The cost should be covered by the interest.
It is also important that you have the opportunity to make deposits at any time. Only then can the credit card be used very flexibly. It is also important that you do not bind yourself to the credit card for long.
Flexible notice periods are important. Read the fine print carefully to find out about fees and interest. You should also find out the conditions of use and termination.
The fees for withdrawing cash from ATMs and for supplying cash abroad are also important. With many credit cards, the cash supply at home and abroad is free of charge. Should a financial institution charge fees, it makes sense if you carefully examine alternative offers.
Flexible use but with certain costs
Basically, a credit card with a partial payment function offers flexible financial scope that can be used if necessary. However, the comparatively high interest rates that are due for payment in installments must be noted.
When choosing the right offer, you should make sure that you can make flexible repayments at any time. Annual fees for using the credit card should also not apply.