Amex, Citi, and other banks let you pay off big purchases over time for a fee — but make sure you do the math before you splurge on holiday shopping

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  • Many consumers may go into debt from holiday shopping, adding to financial stress from the coronavirus .
  • Three of the biggest banks in the US have buy-now, pay-later programs that either charge fixed fees or significantly lower financing rates on certain purchases. 
  • To make sure you're making the most of your rewards opportunities, do the math on how much you're actually paying the ability to take longer to pay off a purchase.
  • Read Business Insider's guide to the best low-interest credit cards.

Ask any financial expert for the most important rule in smart credit card reward strategy, and they'll probably give you the same response: Pay your bill in full every month.

Ask consumers about their holiday plans, though, and a big chunk will tell you something very different: They are going to make this season merry and bright and figure out how to pay for it later.

In fact, in a recent holiday shopping survey by Equifax, 33% of shoppers indicated that it takes a month or more to catch up on paying for holiday purchases, and 19% regret their holiday purchases when they receive their credit card bill.

Debt is a very dangerous slope, particularly with the average interest rate on credit cards in the 15% range. Introductory 0% APR offers might be a tempting option to spread out payments over time, but that may involve applying for a credit card.

To help avoid a troubling cycle of minimum payments, there are three bank programs that operate on a buy-now, pay-later model. If you must buy something this holiday season that you will need some extra time to pay off, consider these more affordable options.

Pay-over-time credit card program comparison

My Chase Plan Amex Plan It Citi Flex Pay

Minimum purchase amount

$100

Minimum purchase amount

$100

Minimum purchase amount

$100

Payment plan length

Three to 18 months

Payment plan length

Three to 24 months

Payment plan length

Three to 24 months

Monthly fee

Varies by card, purchase amount, your credit, and your account history

 

Monthly fee

Varies by card, purchase amount, your credit, and your account history

Monthly fee

Varies by card, APR-based rather than a fixed fee

 

Maximum number of active plans

10

Maximum number of active plans

10

Maximum number of active plans

Several (unspecified)

Cards available

Most Chase consumer credit cards (36 total)

Cards available

19 Amex cards — including the American Express® Green Card, American Express® Gold Card, and The Platinum Card® from American Express

 

Cards available

Most Citi-branded cards, only available to select Citi customers

My Chase Plan

You may have seen headlines recently about Chase announcing My Chase Plan, but this program has been available for many cardholders for quite some time. I received my first invitation to set up a My Chase Plan in the spring of 2019, so it seems like the bank is really trying to spread the word in advance of the holidays.

How does it work? Let's say you're planning to buy a $600 television to spruce up your parents' home entertainment setup for the holidays. Before you buy it, you can calculate the estimated costs of a My Chase Plan in your online banking account or the Chase mobile app.

The bank will give you three payment options, but it's important to note that these options vary based on your card. For example, I calculated a $600 My Chase Plan on both my Chase Freedom® and Chase Sapphire Preferred® Card. Each card gave me six-month, nine-month, and 12-month payment options, but the Chase Freedom® was slightly cheaper.

This is likely due to the fact that using the Chase Freedom® in a traditional sense would have been cheaper; its APR is two points lower than my Chase Sapphire Preferred® Card.

Chase Freedom — My Chase Plan $600 purchase

  • Six month: Six payments of $103.89; total cost of $623.34
  • Nine month: Nine payments of $70.46; total cost of $634.11
  • 12 month: 12 payments of $53.77; total cost of $645.24

Chase Sapphire Preferred — My Chase Plan $600 purchase

  • Six month: Six payments of $104.56; total cost of $627.36
  • Nine month: Nine payments of $71.09; total cost of $639.78
  • 12-month: 12 payments of $54.37; total cost of $652.44

Calculating a plan before you make a purchase is the best use of this feature since you'll have a true estimate of what that purchase is actually going to cost. However, you can also set up a My Chase Plan within 90 days of a transaction if you decide you want to spread out the expense with a fixed fee. `

Amex Plan It

Amex's Plan It is very similar to My Chase Plan, but it's been around much longer. It debuted on 16 Amex credit cards in the summer of 2017, and over the next three years, people created nearly five million plans worth $4 billion.

Amex beat Chase to the holiday rush to try to get more people to take advantage of Plan It, too. The company added the feature to Green, Gold, and Platinum cards this summer.

I no longer have an Amex (part of a personal effort to slim down my credit card portfolio and my annual fees), but it's easy for non-members to get a deeper look at potential pricing options with the Amex Plan It calculator. Amex indicates that monthly plan fees range from 0.61% to 1.17% of a purchase. So, for example, if you decided to use Plan It to spread out the costs of a $1,000 purchase, your monthly fee could range from around $6 to $11.70.

Citi Flex Pay

While Chase and Amex are trying to spread the word about their alternative payment programs with press releases, you won't find Citi making lots of noise about its Flex Pay feature. "Eligible cardmembers would receive a communication from us [if they are chosen to participate]," a Citi spokesperson told me via email.

The other big point of differentiation from Chase and Amex is that Flex Pay is APR-based — not a fixed-fee cost. The APR is lower than the APR that is typically assigned to the card.

While Flex Pay may be more limited than its competitors, it is expanding, and there is one place where you're likely to receive an invitation to spread out your payments: Amazon. At checkout, eligible customers with a Citi card will see options that include an APR as low as 6.74 percent on monthly payments between three months and 24 months.

Important things to know about pay-over-time plans

You'll still earn rewards

All of these programs spell out the fact that you will still rack up your rewards points on these purchases because, well, everyone likes to earn rewards. However, it's important to remember that rewards aren't as meaningful when you're paying more.

Sure, you might earn 1,000 points on a $500 purchase, but it's not $500. It's whatever you wind up paying over the life of the plan, and you will not earn any reward points on those fixed fees.

The shorter, the better

With all of these options, you'll save the most money by paying off the purchase as quickly as possible.

If you're making a huge purchase, it may be wise to consider a 0% APR offer instead

These plans might let you spread out a $5,000 purchase over 18 or 24 months, but that doesn't mean it's a great deal. There are plenty of introductory 0% APR offers that will not charge you any interest for a certain period of time that can wind up saving you a big chunk of cash.

Keep in mind you should only take advantage of a 0% APR offer if you have a plan to pay off the balance before the promotional period ends. Otherwise, you could get stuck with high-interest debt that's even more difficult to manage.

Citi Citi® / AAdvantage® Platinum Select® World Elite™ Mastercard®Chase Marriott Bonvoy Boundless™ Credit CardChase Chase Freedom Unlimited®

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