Pay a purchase with the card and repay the amount in installments. This is the functionality offered by the so-called revolving cards, or installment cards, payment instruments that can be used like normal credit cards but, unlike the latter, they do not provide for a refund of the entire amount spent on balance in the following month to the transaction, but its installment and repayment in monthly installments (which also include the payment of interest).
There are both pure revolving cards on the market, with which therefore the repayment is always in installments, and the so-called option cards, a type that is increasingly common today which allows, at the time of payment, to choose between full or installment repayment.
Characteristic of revolving cards
Revolving cards fall into the category of consumer credit: the bank or the financial company that issued it grants the holder a credit line, therefore a certain amount that the customer can use even if he has no money on the account, and then repay in installments . Usually these cards allow you to use the credit line not only for the payment of goods and services, but also for the advance of cash with withdrawal from ATMs. As it is repaid, the credit line is automatically regenerated.
These cards were originally conceived for the payment of durable goods with amounts of a certain amount, but in fact they have become a tool to finance even smaller purchases, to face temporary liquidity problems or to plan the own outputs.
Different types of cards with different characteristics are available on the market: in addition to the option cards already mentioned, there are also revolving that allow you to customize the installments. Years ago it could happen that revolving cards were sent directly to the owners’ home even in the absence of a specific request, or assigned together with the loyalty cards of certain retailers, but today the consumer is much more protected because the card must be given separately from other products, carefully illustrating their characteristics.
What to watch out for
Since the use of the installment card is comparable to a consumer credit form, it is necessary to follow the general rule that applies to all loans, namely to keep an eye on costs.
The main cost item obviously consists of the interest rate paid on the credit line used, which can also be quite high. To this item are added the fee, the costs of the bank statement, the costs of collecting the installments, any fees on withdrawals, any insurance coverage, etc.
To have a summary cost index, as always, it is good to look at the Taeg (Annual percentage rate of charge). It is also important, when making many purchases in installments, to always try to keep a precise idea of the amounts to avoid losing sight of the entity the commitment that is assumed.