Hidden Traps (and Benefits) of Instalment Plans
Instalments are a longstanding feature of credit cards. By breaking up big transactions into smaller repayments over time, pricier things are more affordable. Unfortunately, just like how credit cards can cause problems and financial losses to a person if used impulsively, there can also be quite a few downsides to instalment plans, even those that advertise themselves as being “interest-free”.
Early repayment incurs fees
Even if your instalment plan is supposedly free of interest or processing fees, many banks I know charge an early termination fee should the instalment arrangement be stopped before the full term. Not only would you need to repay the remaining owed amount in full, a fee is typically charged.
Here are the fees I could find for some common banks in Singapore:
| Bank | Instalment Termination Fee |
| CIMB | S$50 |
| Citibank | Not Specified |
| DBS | S$150 |
| OCBC | S$150 |
| Standard Chartered | S$150 |
| UOB | S$150 |
To avoid these fees, choose banks with lower termination fees, or perhaps more obviously – try not to use instalment plans altogether.
Buy Now Pay Later (BNPL) apps could also be another solution, but more on that later.
Early termination fee complicates card cancellation and annual fees
While you can dodge early termination fees by not prematurely ending your instalment plan, you may run into issues when the affair of annual fees crops up. When annual fees for a credit card are charged, cardholders can always request for waivers or cancel the card if waivers are not granted. Having an instalment plan complicates this.
For instance, if you have a 24-month instalment plan placed on a card on its first month and the bank decides not to grant an annual fee waiver at the 12th month, you are now caught between a rock and a hard place. You could either cancel the card to avoid the annual fee but incur the early termination fee of your instalment, or have no choice but to pay the annual fee in order to keep your instalment plan running. Either way, you are paying fees as a result of having the instalment plan in place.
To avoid this, make sure your instalment plan does not cross your card membership year so that such a dilemma does not arise. Otherwise, it would be a good practice to put your instalment on cards that have annual fees waived permanently. BNPL apps are also a good alternative to traditional instalment plans if the retailer you are shopping at offers them.
Instalment plans do not earn cashback or miles
This might be obvious for the more experienced, but since it gets asked every now and then I think it’s worth noting this down: instalment plans do not earn rewards with credit cards. Even cards like Amex True Cashback which earns cashback on nearly anything excludes instalment plans from its rewards.
When you can get anywhere between 5 to 8% cashback or 4 miles per dollar for most types of spend, giving them up can make your instalment plan pretty costly even if it is technically “interest-free”.
You can sidestep this by putting your payments on buy-now-pay-later (BNPL) apps instead, and those would still get you credit card rewards while splitting up your payments.
BNPL apps sidestep many such issues
In recent years, BNPL apps like Atome have made instalment plans much more accessible and consumer-friendly. Such apps tend to do away with many fees associated with the traditional type of instalments, so you can make early repayments without any penalty. You can even change the credit card that you’re using for your repayments and earn credit card rewards on these payments.
BNPL relies heavily on merchant acceptance, however, so they are not supported everywhere while many banks tend to allow you to break up any transaction you charge to your card into instalments.
Instalment plans encourage overspending
Though BNPL apps tend to do better than instalment plans in terms of fees and card rewards, they can cause similar problems that instalment plans bring about. BNPL companies and banks are obviously not offering to break up your payments from the goodness of their hearts. Buying things on credit tends to encourage overconsumption and spending beyond one’s means, and credit card debt is indeed on the rise in Singapore. Further breaking up the payments over time often gives a false impression of affordability for those who are not so good with money.
While it may be a natural belief for many people to think that they are fiscally responsible, I imagine that most people who eventually found themselves in credit card debt also thought they could handle the repayments. If you are using instalment plans because you are unable to pay off the price of something in full, particularly something that is frivolous and not necessary, it’s time to reconsider the purchase.
Used correctly, instalments can net you more interest
As with most tools, there are still some upsides to be had when it comes to instalment plans. If your instalment plan is free (or low enough in cost), it can actually earn you a significant amount of interest given the high rates these days.
If we broke up a S$12,000 purchase over 12 months making S$1,000 of repayments each month, we can place the amount in a bank account of say 3.5% p.a. interest rate and get quite a significant amount of interest:
| Month | Amount Sitting in Bank | Interest (At 3.5% p.a.) |
| 1 | S$12,000 | S$35.00 |
| 2 | S$11,000 | S$32.08 |
| 3 | S$10,000 | S$29.17 |
| 4 | S$9,000 | S$26.25 |
| 5 | S$8,000 | S$23.33 |
| 6 | S$7,000 | S$20.42 |
| 7 | S$6,000 | S$17.50 |
| 8 | S$5,000 | S$14.58 |
| 9 | S$4,000 | S$11.67 |
| 10 | S$3,000 | S$8.75 |
| 11 | S$2,000 | S$5.83 |
| 12 | S$1,000 | S$2.92 |
| Total | S$227.50 |
Get “rewards” for transactions that don’t normally net you rewards
S$227.50 can be considered roughly 1.90% in rebate on a S$12,000 transaction which isn’t fantastic as far as rewards go, but it’s especially useful if the transaction does not normally attract card rewards to begin with. Of course, do consider any fees charged by your bank for splitting up the transaction this way.
The OCBC NXT is a very interesting card given its unique mechanism of breaking up transactions charged to the card. Note that the other pitfalls like early termination fees still apply to this card.
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Seth Wee was a licensed financial adviser representative from 2009 to 2025, with over 16 years of experience in Singapore’s financial advisory industry.
He started Sethisfy.com in 2019 to share practical insights on credit cards, banking products, and miles strategies, helping readers identify financial products that deliver the best value. Seth has been featured in CNA, Channel 8, Today, and a host of other publications. In 2025, he was also part of a panel at CPF’s Ready For Life festival.
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I long have queries about installments and your article answered them. Thanks for writing this, Seth.
Glad it was helpful!