Beware of Debt from 0% installment trap.

No matter what department store you walk through, you’ll find stores offering 0% installment promotions. Many people are distracted because of this kind of marketing, but is the 0% installment really good as we thought? Today, ACU PAY will tell you the secret of 0% installment which can cause debt unconsciously if we used it incorrectly.

1. Check if the 0% installment is for a temporary or permanent period

Is the 0% installment for all the contract time or just a temporary? For high-value goods, there is often a condition that states the installment payment period is for 12 months. In fact, the 0% installment is just for the first 3 or 6 months of the contract. If you do not carefully read the condition, you have to pay a lot of interest rate for the remaining period of the installment contract. 

2. Do not receive points from the credit cards

Sometimes each credit card has different conditions for 0% installment. Some credit cards will not receive points, but others may get points as usual depending on the terms of the credit card.

3. Cannot pay in the minimum amount

For example, the purchase is 30,000 baht, if you use the 0% installment promotion, it means that you have to pay for 3,000 baht from the first month to the 10th month. The minimum amount cannot be paid because the amount for monthly installments payment has already reduced from 30,000 to 3,000 baht. In addition, the minimum credit card payment is not a good thing because the payment of the amount that should be paid will increase interest rates and become a bad debt.

4. A decreases credit limi

Credit card installments may decrease the amount of loans you request from financial institutions. For example, Home Loans. If you apply for a 30-year home loan with 7% interest per annum, the full loan is 3,000,000 baht. However, due to the monthly installment of 5,000 baht, the loan amount will be reduced by 750,000 baht, leaving only 2,350,000 baht.

5. Late repayment, back-paying interest.

If the payment is late, the invoice will come with interest on default which will be charged from the first day of installment. When you fail to pay their credit card debts for up to three months in a row, the credit history will be recorded in the credit bureau, making it impossible to borrow and transact with other financial institutions. Furthermore, if the debt cannot be repaid, it could lead to further lawsuits.


Who gets the advantage of 0% interest installment?

It sounds like we as customers are the ones who receive benefits, but if we use it incorrectly, banks will be the ones who take all the advantage. The bank will receive a fee spread from stores participating in the 0% installment promotion, based on the percentage set. Moreover, the most profit that banks will receive from credit card users is the gain from interest on fines resulting from default.

How to get advantage from 0% interest installment?

On the other hand, installment payments may benefit credit card users by taking into consideration the following points.

1. Consider the necessity

If it is necessary to live, work, or pay insurance premiums, it can be used as appropriate. If they are luxury goods to satisfy the personal desires, there may be an increase in the debt burdens unnecessarily.

2. Check if the 0% interest is on every installment

Check the 0% installment promotion at each store to see if the store charges 0% interest during the installment period so that they don’t have to pay interest later.

3. Be punctual 

0% installment is the use of cash in the future. If you compare income, expenses, and debt, you should not have a debt of more than 40-45% of your monthly income. For example, the wage is 30,000 baht per month, the total debt should not exceed 12,000 – 13,000 baht. If other debts exist, we should consider them carefully before purchasing new products. Therefore, we should be able to pay the full amount of the product or cut the monthly salary to pay the installment of the product.

Therefore, the most effective use of credit cards is to use them carefully before deciding on the installment of each item. Consider whether it is necessary or not. Once the installment payment has been started, installments should be paid on time. In addition, customers should complete the installment one by one before starting a new installment so as not to increase the debt in the future.

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