What Credit Cards with 0% Installment Plans Don't Tell You

We often use credit cards as installment payment cards, right? Especially for products with 0% interest, it's a great deal! But have you ever wondered what banks gain from allowing us to use credit cards as installment payment cards at 0% interest? And what secrets are hidden in these credit card promotions? Let's find out!

What Financial Institutions Gain from 0% Installment Plans

Department stores collaborate with financial institutions for these transactions. Generally, if the product requires interest payments, the financial institution issues a loan for that product and shares the interest earned with participating department stores.

At the same time, a 0% installment plan for products with a repayment period of 6 to 12 months guarantees that you will definitely use your credit card and will have to spend on other items with the same credit card, which is a trap that can lead you into credit card debt in the future.

The Trap of 0% Installments

In addition to purchasing products under the 0% installment conditions, there are many 0% interest offers for credit cards issued by various financial institutions. This 0% interest often comes with conditions, such as 0% interest only for the first three months, allowing buyers to pay the same amount monthly during the initial period without interest.

The trap of conditional 0% interest is that these credit card promotions often accompany high-priced items because they have high interest rates, luring buyers with the 0% installment promotion to make them feel they are reducing interest.

However, in reality, you only avoid paying interest during the initial installment period. Once you choose this condition, you will ultimately have to pay interest later until the installment is fully paid off.

0% Down Payment in the Automotive Industry

This 0% condition also exists in the automotive sales industry. Normally, you would need to pay a down payment upfront, and then pay the remaining amount for the car in installments. However, the 0% down payment promotion allows you to buy a car without having to pay a down payment.

The problem that arises from a 0% down payment is that you will have a higher installment amount or a longer repayment period for the car due to purchasing without a down payment.

A longer repayment period means you will pay more interest. The longer the term, the higher the interest, making this method a great trap for financial institutions. If you truly cannot handle the interest burden, it is advisable to refinance to alleviate the interest burden, but the repayment period will also be extended.

Inflating Product Prices Before Advertising 0% Interest

Inflating product prices beforehand often occurs with financial institutions or department stores that have their own product brochures. This is to encourage customers to look at the prices and decide based on the information in those brochures. Most customers rarely compare prices in the market or think the price differences are minimal, thus falling for the 0% trap.

For example, a product in the market priced at 18,000 baht might be advertised in a brochure for 18,990 baht with 0% installment. When calculated as monthly payments, it seems manageable, and this is where they lure buyers into the trap.

After reading this, you might wonder why so many people prefer to use the 0% installment payment cards if they are not beneficial. The truth is, everything has two sides. The 0% installment also has advantages in reducing interest burdens.

If you have discipline and pay on time for every installment, remember to consider your own ability to repay before using a credit card for any purchases to avoid future troubles.

Thank you for the information from finance.rabbit.co.th