More opting to buy now, pay later

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#1
My personal view - I hate paying by installments, even if they are interest-free. I'd rather just pay it off all at once if I can afford it. If it's too expensive, then I probably am going for something I want, but don't need! Tongue

Oct 31, 2010
More opting to buy now, pay later

More people using 0% instalment payment plans offered by banks and retailers, but paying over long stretch can take its toll
By Ng Kai Ling and Kon Xin Hua

Want that latest designer bag but can't cough up $2,000 upfront? Buy now, pay later: That is what more people are opting to do these days.

From spectacles and spa treatments to laptops and lounge chairs, almost anything priced above $500 can be bought and paid for in instalments, using the zero per cent instalment payment plans (IPPs) offered to credit card holders.

Just last month, Madam Ivy Chua, co-owner of A* Bags & Jewellery Collections in Thomson Plaza, sold three designer bags totalling $7,000 to a regular customer who used the IPP offered by DBS Bank to pay for her purchases.

'With instalments, some customers are willing to spend more at one go because they don't have to pay the bank a lump sum,' said Madam Chua, who started offering the instalment plan last year, in Mandarin. Her shop sells second-hand designer bags and also new ones bought directly from boutiques overseas.

All three local banks - DBS, United Overseas Bank (UOB) and OCBC Bank - say more cardholders are using their zero per cent IPPs when making purchases.

While they declined to give the numbers of such transactions, Ms Gan Ai Im, UOB's head of cards and payment products for the region and Singapore, said there has been a gradual year-on-year increase in payments by instalment, and growth in the past year was in the double digits.

As of August, there were about 6.2 million credit cards held by individuals in Singapore.

The three banks started IPP services about 10 years ago as another payment option for their cardholders.

When a customer uses the service, his bank will pay the full amount of his purchase to the merchant but bill him in instalments of six, 12 or 24 months.

One reason for the growth of this usage is that it can be used at different retailers offering a variety of products and services, including spas and shops selling high-end watches, spectacles and jewellery, as well as online shops.

To qualify for IPP, cardholders need to spend a minimum of $500 on a single purchase.

Banks have gone out to court retailers to get on board. OCBC now has 1,730 participating outlets, DBS has more than 1,000, and UOB has the widest coverage with 3,500.

They range from curtain shops in the heartland to high-end watch boutiques like Cortina.

Retailers like spas and jewellers also have tie-ups with multiple banks.

Aspial-Lee Hwa Jewellery's business director, Mr Kean Ng, said customers can use such instalment plans at its 32 boutiques with credit cards from seven different banks.

'We took up IPP with the banks to offer our customers, who may want to spread their spending over a longer period, another payment option. IPP contributes about 10 per cent of our overall sales,' he said.

The percentage of transactions made using these credit card instalment plans ranged from 5 per cent in heartland shops selling watches and spectacles, to up to 80 per cent, mostly at spas.

Before the instalment payment plans were offered, few businesses allowed customers to take home their purchases before paying the full amount.

One of them is furniture giant Courts, which has both in-house payment plans and tie-ups with banks.

It started its own hire purchase schemes as early as 1974. About 25 per cent of its customers use one of these plans.

Others, like goldsmiths in Little India, allow customers to take home their purchases after making the full payment over three months.

'Customers use hire purchase to lock in the price of the item, instead of saving up over three months. By then, the price may have gone up,' said Mr S.P. Ramu, director of Ani Mani Goldsmiths and Silver Jewellers in Serangoon Road, who started offering hire purchase plans more than 10 years ago.

Most, if not all, goldsmiths in Little India also offer similar schemes.

But while these instalment plans help to spread out one's financial burden, having to service instalments for a long period can still take its toll.

Operations manager Julian Poh bought a laptop, a television and a washing machine for a total of about $5,000 at the end of 2007 using his credit card's interest-free plan.

Even though this means he has to pay only about $350 a month over 24 months, the full $5,000 was deducted from his credit card limit.

'At that time, it felt less painful because I thought paying by instalment was more manageable. But it dragged on for too long and my credit limit was greatly reduced,' he said.

kailing@sph.com.sg

xhkon@sph.com.sg

--------------------------------------------------------------------------------
Credit limit cut

'At that time, it felt less painful because I thought paying by instalment was more manageable. But it dragged on for too long and my credit limit was greatly reduced.'

Operations manager Julian Poh, who bought goods costing about $5,000 in 2007 using an interest-free plan with instalments over 24 months. The full $5,000 was deducted from his credit card limit

My Value Investing Blog: http://sgmusicwhiz.blogspot.com/
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#2
Psychologically, I would also prefer to pay off the items at one go..
This is because I hate debts and I do not know when I will need the money in future...
And I do not like the idea of having to pay for the same thing over a long installment period..

Logically, 0% installment is good for the following reasons:

1) Inflation...
Last time chicken rice cost $1.50.. Now $3.00..
if the value of money is depreciating, you get more current value by spending future money !!!

2) Accumulate more money for investment...
With 0% installment, one can save a bigger chuck of their money for investment..
Hopefully the dividend from investment can be used to pay off the purchase...
Something like turning a bad debt into a good debt strategy...

Well, that is about all that I can think off...

But my personal preference... Pay off all my debts...


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#3
There's no difference actually if it is interest-free.
It's the same as income tax. Some people prefer to pay in one go while some prefer instalments.

A spendthrift is always a spendthrift regardless of the type of payments.

Anyway,for those who wants to buy electronics or electrical items, neighbourhood shops offer better price than courts, HN or best denki in most cases.
No instalment of course Smile


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#4
I had a bad experience once and i remebered it for life. I bought an item and paid by installments since its interest free. It didnt cross my mind to pay by installments since the item i bought is not expensive at all and i certainly am able to pay it at one go. Since the sales person suggested paying by installments and its interest free, i see no harm so went ahead with his suggestion.

Then comes by credit card annual fee. I tried to waive it but got rejected for the reason that i am still paying an item on installment using that credit card. I ask if i can pay off the remaining amount owed, the bank customer phone officer say i have to pay a additional amount of i think S$1k for the breach of contract. The amount i owed is only $200+.

From then onwards, i never use those so call interest free installments via credit card anymore. And i also hardly use that bank credit card anymore. Banks are worst than loan sharks imo. There are details which banks will hide from u.
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#5
(31-10-2010, 03:38 PM)Bibi Wrote: I had a bad experience once and i remebered it for life. I bought an item and paid by installments since its interest free. It didnt cross my mind to pay by installments since the item i bought is not expensive at all and i certainly am able to pay it at one go. Since the sales person suggested paying by installments and its interest free, i see no harm so went ahead with his suggestion.

Then comes by credit card annual fee. I tried to waive it but got rejected for the reason that i am still paying an item on installment using that credit card. I ask if i can pay off the remaining amount owed, the bank customer phone officer say i have to pay a additional amount of i think S$1k for the breach of contract. The amount i owed is only $200+.

From then onwards, i never use those so call interest free installments via credit card anymore. And i also hardly use that bank credit card anymore. Banks are worst than loan sharks imo. There are details which banks will hide from u.


I just got this exact same scenario from the bank whom I stayed long as a customer. In a short summary, the cust svc gal tried to pull a fast one on me by refusing waiver due to a small o/s installment payment < $200.

I simply threatened to pull out all my funds and cancelled all my cards with them if they dare to impose.

I got waived. The banks are simply bullshitting.

Yes, I am not a revolving door, ie. paying min every mth, but still looking on the account of decades with them, they never took this into account.

Bloodsucking moneylenders.




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#6
(31-10-2010, 03:38 PM)Bibi Wrote: I had a bad experience once and i remebered it for life. I bought an item and paid by installments since its interest free. It didnt cross my mind to pay by installments since the item i bought is not expensive at all and i certainly am able to pay it at one go. Since the sales person suggested paying by installments and its interest free, i see no harm so went ahead with his suggestion.

Then comes by credit card annual fee. I tried to waive it but got rejected for the reason that i am still paying an item on installment using that credit card. I ask if i can pay off the remaining amount owed, the bank customer phone officer say i have to pay a additional amount of i think S$1k for the breach of contract. The amount i owed is only $200+.

From then onwards, i never use those so call interest free installments via credit card anymore. And i also hardly use that bank credit card anymore. Banks are worst than loan sharks imo. There are details which banks will hide from u.

I encountered a similar experience as well..

In the end, I paid the annual fee but once my installment payment were paid up... I terminated all my credit cards with this bank...

U guess...

DB_ Bank..



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#7
(01-11-2010, 01:04 AM)arthur Wrote:
(31-10-2010, 03:38 PM)Bibi Wrote: I had a bad experience once and i remebered it for life. I bought an item and paid by installments since its interest free. It didnt cross my mind to pay by installments since the item i bought is not expensive at all and i certainly am able to pay it at one go. Since the sales person suggested paying by installments and its interest free, i see no harm so went ahead with his suggestion.

Then comes by credit card annual fee. I tried to waive it but got rejected for the reason that i am still paying an item on installment using that credit card. I ask if i can pay off the remaining amount owed, the bank customer phone officer say i have to pay a additional amount of i think S$1k for the breach of contract. The amount i owed is only $200+.

From then onwards, i never use those so call interest free installments via credit card anymore. And i also hardly use that bank credit card anymore. Banks are worst than loan sharks imo. There are details which banks will hide from u.


I just got this exact same scenario from the bank whom I stayed long as a customer. In a short summary, the cust svc gal tried to pull a fast one on me by refusing waiver due to a small o/s installment payment < $200.

I simply threatened to pull out all my funds and cancelled all my cards with them if they dare to impose.

I got waived. The banks are simply bullshitting.

Yes, I am not a revolving door, ie. paying min every mth, but still looking on the account of decades with them, they never took this into account.

Bloodsucking moneylenders.

I see no consistency in the service standards of banks. One who is more assertive can have his/ her way by threatening to terminate all cards with the bank and/or pull out the funds from the bank in order to get the annual fee for credit card waived while another more softer type having no bargaining power just have to accomodate to paying the annual fee. I personally have similar enounters before on one occasion having less bargaining power and another occasion more bargaining power and got my annual fee waived.

So far, the best encounter I had is with a bank which I rate it as having high service standards as the bank atomatically renewed my credit card one month before expiry and sent me a new card by mail. I supposed the annual fee is automatically waived for the new card as well since I did not receive any notification about the annual fee as yet. No hassle on my side at all. I truly enjoyed such excellent customer service. This bank is sta....... char....... bank.
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#8
Its interesting how all of us seems to have different experience with different banks.

For me, Stand chart is the worst. To be perfectly honest, I cannot recall the exact circumstances cos it happened a long time ago. Suffice to say, the experience was so bad I swore off their products every since. And in every single bank survey I do, I always list them as the worst bank or the bank I would not do business with. Logically speaking, I know that they are probably not as bad as I imagine it to be but it amazing what one experience many many years back can do to your psyche.

Same with citi. Universally touted for their excellent customer service, my brief experience with them as a customer was quite a different story and so I also wont bother with Citi.

With DBS, all my experiences have been generally positive. I remember I also did a 0% instalment purchase plan on one of their cards but I did not have the unpleasant encounters some of you did with the annual fees and termination penalty etc. In fact, I have never failed to get my annual fee waived and even the occasional bank charges/late fees. Recently they have even automated the process so you dun even need to speak to a customer service officer to have annual fees/bank charges/ late fees waived.

The above are just my personal experiences. I'm not trying to condemn Stand Chart / Citi or heaping praises to DBS.
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