Some major card issuers are offering new ways for you to finance large purchases through a fixed-fee monthly plan. While these plans boast no interest, don't be fooled — you'll still incur a fee every month, which acts similar to interest.
That said, these plans are more transparent than carrying a balance month-to-month and incurring interest charges. When you sign up for a fixed-fee plan, you'll know up front exactly how much your monthly payment is, as well as a breakdown of the plan fees and the total cost.
American Express and Chase are two major issuers that offer fixed-fee plans on many of their credit cards. Below, we explain how each plan works and if it's worth it to sign up.
Amex Plan It
- Minimum purchase amount: $100
- Fee: Varies by credit card, purchase amount and your account history
- Repayment period: 3 to 24 months
- Maximum number of plans: 10
Plan It from American Express lets you split up purchases of $100 or more into fixed, equal monthly payments with a fixed fee and no interest. The percentage used to calculate your monthly plan fee varies depending on the plan duration, the APR that would otherwise apply to the purchase and other factors. However, the plan fees won't be higher than what you'd incur if you chose to carry a balance with interest. The fixed fee may even be lower.
While the monthly plans vary by card member and the purchase amount, plan periods can range from three to 24 months. You can create up to 10 plans and even combine multiple purchases into the same plan.
Here’s an example of what financing a $100 purchase may look like, according to my Amex account.
Amex Plan It
| Plan options | 3 months | 6 months | 12 months |
|---|---|---|---|
| Monthly payment | $33.91 | $17.36 | $9.06 |
| Monthly plan fee | $0.57 | $0.69 | $0.72 |
| Total plan fees | $1.71 | $4.14 | $8.64 |
| Total cost after plan | $101.73 | $104.16 | $108.72 |
The plan terms mentioned in the example above are unique to my account and may not be available to all customers.
Chase Pay Over Time
- Minimum purchase amount: $100
- Fee: Varies by credit card, purchase amount and your account history
- Repayment period: 3 to 18 months
- Maximum number of plans: 10
Chase Pay Over Time lets you pay off purchases of $100 or more through fixed, equal monthly payments. You’ll incur a fixed fee that varies by credit card, purchase amount and your account history. Plan repayment periods range from three to 18 months and you can have a maximum of 10 plans at one time.
Here’s an example of what financing a $100 purchase may look like.
Chase Pay Over Time
| Plan options | 3 months | 6 months | 9 months |
|---|---|---|---|
| Monthly payment | $33.57 | $16.96 | $11.44 |
| Monthly plan fee | $0.23 | $0.29 | $0.32 |
| Total plan fees | $0.69 | $1.74 | $2.88 |
| Total cost after plan | $100.69 | $101.74 | $102.88 |
The plan terms mentioned in the example above are unique to my account and may not be available to all customers.
Fixed-fee plans vs. interest charges
In order to decide if a fixed-fee plan saves you more money than carrying a balance with interest, you need to do the math.
Here's an example of how I compared my fixed-fee plans to revolving a balance with interest.
Amex Plan It
Looking at a $100 fixed-fee plan for my Amex card, the fees are $1.71 (3-month plan), $4.14 (6-month plan) or $8.64 (12-month plan).
Next, I used Bankrate’s credit card payoff calculator to find out how much interest I could incur on a $100 purchase at my current 16.99% variable APR. The estimated interest charges would be:
- $2 for a 3-month plan
- $5 for a 6-month plan
- $9 for a 12-month plan
Comparing this to the Amex Plan It example, the interest charges ($2 to $9) are slightly higher than if I signed up for the fixed-fee plan (which range from $1.71 for three months to $8.64 for 12 months). So the fixed-fee plan is the cheapest option in this example.
Chase Pay Over Time
Reviewing the $100 fixed-fee plan for my Chase card, the fees are $0.69 (3-month plan), $1.74 (6-month plan) or $2.88 (9-month plan).
If I used Chase Pay Over Time for a $100 purchase at my current 14.99% variable APR, the estimated interest charges would be:
- $2 for a 3-month plan
- $4 for a 6-month plan
- $6 for a 9-month plan
So the interest charges ($2 to $6) are higher than the cost of using a fixed-fee plan (which range from $0.69 for three months to $2.88 for nine months). Again, the fixed-fee plan is the most affordable option in this example.
Ultimately, the best choice for you really depends on your situation. You should review the costs of a fixed-fee plan and compare them to the costs of carrying a balance with interest. Since fixed-fee plans vary by credit card, purchase amount, interest rate and account holder, the terms you receive are unique to you.
Bottom line
At the end of the day, fixed-fee plans will cost you money that you could otherwise save if you take advantage of a 0% APR period. But if you can’t qualify for a no-interest card, or simply don’t want to deal with multiple credit cards, these plans may be a good option for financing large purchases.
Before you activate a plan, make sure you take a close look at all the costs to determine whether it’s cheaper than incurring interest charges or not. Then choose the most affordable option. And if you ever want to pay off a fixed-fee plan from Amex Plan It or Chase Pay Over Time, you can pay off your balance early without a penalty.
