Guide To Focusing on how Interest-Free Payment Plans Work In Singapore

As most of us would already know, credit can be both a benefit along with a bane for those who wield it. When used responsibly, credit is a good thing and also at times, even essential – because it provides us with additional flexibility for managing our income and making large payments more manageable.

For example, whenever we use our credit cards for any purchase, we are utilising credit. The issuing banks are paying for our purchases first while giving us an interest-free duration of typically 30 days or more to pay our credit card debt.

However, if we don't use credit responsibly, it can cause us financial difficulties once we have the ability to spend some money we do not have. If we are not disciplined in paying down our credit card debt promptly, we risk incurring hefty interest costs and falling into a spiral of debt.

How Interest-Free Payment Plans Will help you Manage Debt

Credit card payment due dates are usually 25 calendar days from the statement date For instance, if your statement date is 3 August, your payment due date would be 28 August. If you don't pay your bill entirely through the payment deadline, you may incur late fees and finance charges.

If you are unable or don't want to, pay your bill in full by the payment deadline, one option that you could consider would be to utilise interest-free payment plans. This allows you to consolidate some of the transactions that you have made on your charge card, and to spilt your purchases into interest-free monthly instalments.

For example, the interest-free DBS Payment Plans permit you to select as much as 10 transactions (the least $100 per transaction) inside your charge card accounts to consolidate and to convert into monthly instalment payment plans ranging from 3 to 24 months. This provides you more time to repay the full amount that you have spent, without having to incur unnecessary finance charges and interest costs.

Similar to how we use our credit cards, utilising interest-free payment plans should never be seen as an excuse to overspend on items that we can't afford (and should not be buying), but rather, like a solution for a more effective and possibly cheaper, payment schedule.

For example, many insurance policies offer policyholders the option of either paying monthly or annual premiums. Should you subscribed to an insurance policy, you might be offered the choice of either paying a yearly premium of $1,150, or 12 monthly obligations of $100 ($1,200 annually). Note that the annual premium is slightly cheaper overall but needs a higher one time payment.

One method of getting the very best of both worlds is to spend the money for annual premium with your charge card, after which converting the amount as a result of 12-month interest-free payment plan. By doing this, you reduce your monthly payment to $95.83 ($1,150/12) instead.

Interest-free payment plans is yet another viable payment solution for big-ticket items such as buying furniture. For instance, should you spend $9,000 on furniture for the new house, you may would rather pay a regular monthly instalment of $1,500 for 6 months, instead of $9,000 at once.

Interest-Free Payment Plans Aren't Always Free

There is really a misconception that interest-free payment plans are free. However, this is not always the case.

Interest-free payment plans usually have a one-time processing fee based on the transaction amount. For instance, you may be charged a 6% fee to convert your bill into a 24-month repayment plan. In case your purchase costs $5,000, what this means is the processing fee will be $300. The fee pays upfront.

In Singapore, banks are required to state the effective rate of interest (EIR) that you will be paying once they advertise an interest-free payment plan. This effective rate of interest will require into consideration the one-time processing fee you need to pay, if applicable.

Payment Plans Are To Help You Enhance your Income, Not An Excuse To Overspend

Similar to the way we use our charge cards, an interest-free payment plan gives us a choice of changing the payment agenda for the purchases we made. Sometimes, this might result in us saving money (e.g. using it to pay for our insurance premiums).

Given the current economic climate, many of us may prioritise our income and could be less inclined to create large, upfront payments when buying items. These could include necessary expenses including educational fees, insurance costs, home furnishing, tax bill and unexpected big-ticket items. Rather than paying for these items upfront in order to take credit, an interest-free repayment plan can be a worthwhile alternative.

Enjoy Interest-Free With no Processing Fee With DBS Payment Plan

If you want to make use of a payment plan for some of your purchases soon, you will be happy to understand that DBS is providing 0% in interest and processing fees from now till 31 December 2021. This really is applicable for payment plans which range from Three to six months. In addition, for no less than three DBS Payment Plans from now till 30 September 2021, you will also enjoy a $40 cash rebate. Do note the terms and conditions for this promotion.

If you'd rather use a 12-month, 18-month, or 24-month repayment plan, the one-time processing fee is 5% (EIR: 9.50%), 6% (EIR: 7.86%) and 6% (EIR: 5.98%) respectively.

It's worth noting, however, when you activate the DBS Payment Plans in the reason for purchase at participating retail stores, you won't incur any processing fee, even if you select a 12-month, 18-month or 24-month tenure. For instance, should you spend $2,400 at Challenger (a participating retail store) and choose to spilt your bill over a 24-month period with the DBS Payment Plans when making your payment, you will then be paying $100 a month for the next 24 months, without any processing fee incurred.

For merchants that are not part of the participating retail stores, apply for that DBS Payment Plans via digibank after you have make the purchase. This applicable to your online purchases too.

Do note DBS Payment Plans can only be relevant to payments made using DBS/POSB charge cards.

Using DBS/POSB Charge cards Give You The Choice to Convert In Into An Interest-Free Payment Plan

If you are unsure about whether you need to utilise the repayment plan, you can still pay making use of your DBS/POSB credit cards first, before activating the interest-free repayment plan once you have made you buy the car, before you need to pay your charge card bill.

This way, you receive some additional time to consolidate your spending and to decide if you intend to split your credit card balance with an interest-free payment plan. You may also combine up to 10 eligible transactions (minimum of $100 per transaction) and also to obtain a payment plan in line with the total spend.

Lastly, do observe that you will find penalties for early repayment and card termination. To prevent incurring these unnecessary costs, ensure you aren't looking to cancel your charge card anytime soon or are intending to repay your bill early.