Credit Card "Plan It" options

[renata ricotta]

Lately on my premium credit cards (Amex Platinum, Delta Reserve) I've been seeing a lot of promotion for their "Plan It" program, where you can split up your payment over multiple months. Chase Sapphire has a similar program. It is typically for a fixed fee, but they often promote $0 plans if you set one up within the next X weeks.

As a caveat, I would nearly never use this with a fee. (I suppose if I needed to cover an unexpected emergency and the fixed fee was lower than whatever other transaction costs I'd need to free up liquidity elsewhere, I'd consider it.)

Any downsides to using it when there is a promotional $0 fee? As it happened, there was a promotion right after I made a couple of large-ish furniture purchases, so I set one up. Instead of paying $3k or so in my next regular cc cycle, it's split up over 6 months for free. It seems to be the same logic for putting purchases you could buy with debit on a credit card -- if you can essentially borrow money for free, why wouldn't you?

I can't see any downsides other than 1) the psychological effect that might make you feel like you have buying power, so you spend more than you otherwise would [but one already has to get over this for cc purchases generally -- if you can handle it for 6 weeks, why not 6 months?] and 2) using a higher percentage of your credit as the planned amount is taken out of your available credit [but my limits are absurdly high, and I am not planning any major purchases where I need to have super high credit]

Am I missing anything?

[Scandium]

Found this via a search. Surprised not more discussion about it. Seems like a great tool, for us responsible people!

I replaced an HVAC unit and got a $8k charge on my credit card. Chase offered me their "plan" for free since it was the first time I've used it. So instead I pay ~$330/month over 24 months, for $0 fee and 0% interest (yes I double checked their math). Why not?! So I can instead keep my EF earning interest and/or invest more. I basically get at least 5% interest on the money instead ($300-400 extra). I saw no downside

I just randomly saw this on my credit card by chance. I was about to pay it off in full, just luck I spotted it. Wish I knew of it before. If I have other big expenses in the future I plan to check this on cards I churn for me or my wife, hope to get the free offer again, if it's on a per-card basis, not per customer.

[dragoncar]

I was getting some popups saying they are still offering 0% plans through the end of the year.  It really varied by card... I had to go and check to make sure it was really 0 on the card I planned to put my purchase (other cards were not 0%)

Well I pulled the trigger this weekend and made a $20k estimated tax payment to the federal gov.  I was able to get a 0% plan for the next 18 months.  Now I just need to get my refund in ASAP

My credit limit is higher.  I could have even moved stuff around to get more greedy.  But I knew there was a chance they wouldn't offer me the 0% plan for such a large purchase or some other issue so I wanted something I could theoretically cover without a total breakdown.  Looks like my gamble paid off

I also have another "Free" chase plan for last year's property taxes still going

Amex also offers this sometimes for your first plan.  I'm almost done paying off a 24 month 0% plan from two years ago (again, property taxes online).

I may be addicted to these free loans.  Of course, it hasn't always worked out.  I think some of my investments are down from 24 months ago so it might have come out ahead to just sell those investments back then and not do the installment plan.

To answer your original question:  Potential downsides are higher credit utilization with an ongoing credit score hit.  If you need to apply for new credit anytime soon it may not be a good idea take out a large plan.  There are probably some risks of them calling the plan if you miss a payment or other default (depends on the issuer).  But it if was money you've already set aside or allocated for that purchase that shouldn't be an issue.  And if you're a good mustachian you are making all the required payments on time and have a suitable emergency fund.

[sonofsven]

I was getting some popups saying they are still offering 0% plans through the end of the year.  It really varied by card... I had to go and check to make sure it was really 0 on the card I planned to put my purchase (other cards were not 0%)

Well I pulled the trigger this weekend and made a $20k estimated tax payment to the federal gov.  I was able to get a 0% plan for the next 18 months.  Now I just need to get my refund in ASAP

My credit limit is higher.  I could have even moved stuff around to get more greedy.  But I knew there was a chance they wouldn't offer me the 0% plan for such a large purchase or some other issue so I wanted something I could theoretically cover without a total breakdown.  Looks like my gamble paid off

I also have another "Free" chase plan for last year's property taxes still going

Amex also offers this sometimes for your first plan.  I'm almost done paying off a 24 month 0% plan from two years ago (again, property taxes online).

I may be addicted to these free loans.  Of course, it hasn't always worked out.  I think some of my investments are down from 24 months ago so it might have come out ahead to just sell those investments back then and not do the installment plan.

To answer your original question:  Potential downsides are higher credit utilization with an ongoing credit score hit.  If you need to apply for new credit anytime soon it may not be a good idea take out a large plan.  There are probably some risks of them calling the plan if you miss a payment or other default (depends on the issuer).  But it if was money you've already set aside or allocated for that purchase that shouldn't be an issue.  And if you're a good mustachian you are making all the required payments on time and have a suitable emergency fund.

I'm a little confused; you don't actually owe $20k in estimated taxes? So, you file a return and get a refund ( in Feb, or March?) and then are investing the remains of the $20k?

I have taken advantage of these 0% offers in the past, and I would do so in the future with no hesitation (read the fine print, always, take screen shots, etc). My only warning would be that, if you find yourself really needing these offers, they won't be readily available.

[dragoncar]

I'm a little confused; you don't actually owe $20k in estimated taxes? So, you file a return and get a refund ( in Feb, or March?) and then are investing the remains of the $20k?

I have taken advantage of these 0% offers in the past, and I would do so in the future with no hesitation (read the fine print, always, take screen shots, etc). My only warning would be that, if you find yourself really needing these offers, they won't be readily available.

Yeah you got it.  Put the refund in something like VMFXX yielding 5.29% right now.  That’s like $1500 in free interest.  And that’s with the safe route… more risk more reward!

[bacchi]

I'm a little confused; you don't actually owe $20k in estimated taxes? So, you file a return and get a refund ( in Feb, or March?) and then are investing the remains of the $20k?

I have taken advantage of these 0% offers in the past, and I would do so in the future with no hesitation (read the fine print, always, take screen shots, etc). My only warning would be that, if you find yourself really needing these offers, they won't be readily available.

Yeah you got it.  Put the refund in something like VMFXX yielding 5.29% right now.  That’s like $1500 in free interest.  And that’s with the safe route… more risk more reward!

This is smart. We've got two 0% APR cards with thousands left in available credit.

[dragoncar]

I'm a little confused; you don't actually owe $20k in estimated taxes? So, you file a return and get a refund ( in Feb, or March?) and then are investing the remains of the $20k?

I have taken advantage of these 0% offers in the past, and I would do so in the future with no hesitation (read the fine print, always, take screen shots, etc). My only warning would be that, if you find yourself really needing these offers, they won't be readily available.

Yeah you got it.  Put the refund in something like VMFXX yielding 5.29% right now.  That’s like $1500 in free interest.  And that’s with the safe route… more risk more reward!

This is smart. We've got two 0% APR cards with thousands left in available credit.

Well I did have to pay 1.85% transaction fee to payusatax (processor).  But I get 1.5% points on that card (freedom unlimited), redeemable at 2.25% (transfer to sapphire reserve) so it worked out for me. 

[bacchi]

I'm a little confused; you don't actually owe $20k in estimated taxes? So, you file a return and get a refund ( in Feb, or March?) and then are investing the remains of the $20k?

I have taken advantage of these 0% offers in the past, and I would do so in the future with no hesitation (read the fine print, always, take screen shots, etc). My only warning would be that, if you find yourself really needing these offers, they won't be readily available.

Yeah you got it.  Put the refund in something like VMFXX yielding 5.29% right now.  That’s like $1500 in free interest.  And that’s with the safe route… more risk more reward!

This is smart. We've got two 0% APR cards with thousands left in available credit.

Well I did have to pay 1.85% transaction fee to payusatax (processor).  But I get 1.5% points on that card (freedom unlimited), redeemable at 2.25% (transfer to sapphire reserve) so it worked out for me.

Right, good point. One of the cards is a Discover card, which is 2% for the first year. The other card is a WF card, which is 1.5%. I'll have to run the numbers but a 0.35% fee should easily be worth it if I'm earning 5%.