What is pay over time and how does it work?
“Pay over time,” sometimes called “buy now, pay later,” describes a financing tool that allows you to split a purchase into a series of equal payments that you pay over a predetermined period of time. Sometimes these payments can be interest free, depending on the offer.
These plans are often seen online and work somewhat like a credit card in that you can buy things with borrowed money that you promise to repay later. However, there are some differences—like fees you may need to pay—that you may also want to consider.
Let’s learn more about those differences and review how pay over time plans tend to work.
Pay over time explained
Generally, there are two ways to participate in pay over time plans: either through retailers or through credit card issuers.
Generally, pay over time plans offered by retailers divide one large purchase into multiple equal payments. You may only need to pay a fixed monthly fee along with each payment (depending on your plan), but you also may need to pay a fee if you miss any payments. Your plan could be subject other fees as well, depending on the lender.
You may also be eligible for pay over time plans through your credit card issuer, which works in a similar way. For example, Chase Pay Over Time® allows eligible Chase cardmembers to break up qualifying purchases into smaller, monthly payments, providing added flexibility when managing larger credit card expenses.
If you are approved for one of these payment plans, your first payment is often due at the time of purchase. The remaining payments are billed to your credit card, debit card or a linked bank account. Typically, your future payments will be due on set weeks each month until your balance is paid in full.
How retailer pay over time applications work
Deciding if this type of payment plan is in your best interest can depend on the situation. Generally speaking, here’s how you may be able to set up a pay over time plan:
1. Shop for your purchase
First things first, the fun part—shopping! Before you go applying for financing, you’ll usually start by shopping on a retail website as you normally would before arriving at the payment options. Note that some businesses might use a third-party vendor to provide pay over time plans. If that’s the case, you’ll likely see an option to apply for a payment plan with this company at checkout.
2. Fill out the application
Unlike applying for a credit card, pay over time applications offered by retail shoppers might only require you to create an account and fill out some basic personal details like your name, address and date of birth to determine your eligibility. You may be asked for the last four digits of your Social Security number.
3. Review the decision
You'll probably know quickly if you’re approved—often, the decision will show up on your screen within seconds. If you’re approved, you’ll usually be returned to your initial checkout screen where you can review your financing, including payment dates and amounts and any additional fees or interest.
The amount owed on each date should be displayed clearly to show you your repayment details. It’s best to read through your terms and conditions carefully to ensure you understand your agreement.
4. Complete your transaction
When you're ready to make your purchase, you’ll make the first agreed-upon payment and begin your pay over time plan. You’ll be able to receive and enjoy your purchase just as if you’d paid for it in full. After, you should expect your future payments to be deducted on a set date from the bank account, credit card or debit card that you used for your initial payment.
How pay over time through your credit card issuer works
The process is similar for pay over time plans offered through your credit card issuer. Note that plans may differ by card issuer, though.
When using Chase Pay Over Time, there are two main options:
After a purchase is made
If you made an eligible purchase with a participating credit card, you may be able to enroll in a Pay Over Time plan. Here’s how it works:
- Sign into your account on chase.com or the Chase mobile® app and select a participating credit card.
- Select “Pay Over Time” next to an eligible purchase of $100 or more and choose a plan duration.
- Pay for your purchase over time, along with a fixed monthly fee.
At checkout on Amazon.com
If your cart totals $50 or more on Amazon.com, you may be able to select a Chase Pay Over Time plan at checkout. Here’s how:
- Add your participating chase credit card to your Amazon.com wallet.
- If your cart totals at least $50, select your Chase Credit card with “Financing offers available” during checkout.
- Choose your plan duration and pay for your purchase over time with a fixed APR that’s either the same or lower than your standard variable purchase APR.
Does pay over time affect your credit score?
Many buy now, pay over time lenders make “soft” credit bureau inquiries during your application, which may not affect your credit score upfront. However, if the lender chooses to report your account activity to the credit bureaus, the information can show up on your credit report which can affect your score.
Once you’re approved for a plan, you may see an impact to your score if you don’t follow the plan’s rules. For example, if you’re late on a payment, your lender will usually charge fees before escalating things further. If you’re unable to repay your loan, your debt can eventually be turned over to a collector and reported to major credit bureaus, which could hurt your score.
Pros and cons of pay over time plans
Using a pay over time plan may be a potential strategy to split a large purchase into smaller payments, but these plans could come with their downsides, too. If you’re thinking about applying for a payment plan, it can help to compare the pros and cons to help you weigh your decision.
Some pros of pay over time plans may include:
- Fixed monthly fee: As long as you make your payments on time, many pay over time plans only require you to pay a fixed monthly fee alongside your payments.
- Fast decision process: Approval processes for retailers’ plans tend to be quick, with your lending decision often presented to you within seconds after asking for just a few basic bits of information. If you are enrolling in a plan through your credit card issuer, they will likely already have this information.
Some cons of pay over time plans may include:
- Fees and penalties: If you’re unable to make the required repayments, you may end up having to pay late fees in addition to any other penalties outlined in your terms and conditions agreement.
- Potential to overextend your finances: Pay over time plans often allow you to qualify without a hard credit inquiry. This could make it easier for you to be approved, regardless of whether the payments fit into your budget. Borrowing more than you can afford might leave you with too much debt to manage and set you on a path towards missed payments.
If you’re unsure about applying for a pay over time plan to finance a purchase, you may want to consider speaking with a professional financial advisor to discuss your options.
In summary
Pay over time refers to a financing plan often used to break down a large purchase into multiple, payments with potentially just a fixed monthly fee, though other fees may apply. You’ll typically see an option to finance your purchase at checkout if it’s available or after the purchase if you choose a plan offered by your credit card issuer. You may want to be sure you feel comfortable paying back any money you borrow to avoid potential missed payments and fees. You may want to check any credit cards you have for pay over time features, as one may be available.