Many goods are offered with “easy” monthly payments. These payments can often add up to a far higher amount than the actual cost of the good. It can often be a good idea to use a credit card instead of taking up the monthly payments
Monthly payments are in fact a form of lending. Essentially what happens is that the money for the goods, less the amount that is given at the beginning as a deposit, is lent to the customer. The customer as well as going away with the goods also promises to pay an amount back every month, this amount usually includes interest as well as a repayment amount and if a person were to add up all the payments then the money would be more than the actual good cost.
This tends to be used for cars and furniture as well as other “big ticket” items. These goods are usually too large for many people to afford comfortably, and it can be quite common that people have not arranged to borrow the money that is necessary to buy the goods before they have decided to buy the goods.
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Most shops that offer monthly payments are licensed as credit providers. They will be required to get the customer to sign a credit agreement when purchasing the good. They should also be advertising the Annual Percentage Rate, or APR. It will often be the case, as these are unsecured loans that are offered with relatively little credit checking, that the interest rates are considerably higher than many credit cards are.
Another big difference between credit cards and relying on monthly payments is that bargaining is harder for people using monthly payments. This is because they have a relatively weaker position as they are also relying on credit from the store. It is also the case that shops presume that someone who needs to arrange credit will have a narrower choice, and so will find it harder to find another place to buy the good.
Credit cards can mean that bargaining is far easier. Although it is not quite as powerful a position as having cash, it does mean that all the money will be with the shop keeper after the card is accepted, which means that the bargaining position is stronger.
