Exploring the Benefits of Chase Pay Over Time

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When it comes to personal finance, the general rule is to eliminate credit card debt as quickly as possible. The high interest rates associated with credit cards make it an unfavorable choice for unnecessary purchases. However, despite this advice, I decided to give the Chase Pay Over Time feature, known as My Chase Plan, a try. Here’s why I found it beneficial:

Affordable and surprisingly low rates

Credit cards are notorious for their high interest rates, usually ranging from 15% to 25% APR (or more). Naturally, I had low expectations when I explored the details of My Chase Plan. However, I was pleasantly surprised by how cost-effective it turned out to be.

For instance, I used the plan to divide a $3,700 appliance purchase into six equal monthly payments with a $10 monthly fee. After some quick back of the hand calculations, I realized that the $60 in interest over six months equated to an annual rate of approximately 3.3%. This was considerably lower than the usual credit card rates. Overall, I found the affordability of the feature to be quite impressive.

Purchase Amount	$3700
Months	6
Monthly Fee	$10
Monthly Payment	$625

Flexible and user friendly

One of the standout advantages of the Chase Pay Over Time feature is its flexibility and ease of use. The My Chase Plan allowed me to choose a repayment period ranging from three to twelve months, with discounted monthly fees for shorter repayment terms. In my case, I knew I would be closing on a house in two months, and I wanted to maintain liquidity for closing and moving costs without selling my brokerage account funds. By opting for a shorter repayment period, I could commit to a minimum repayment time at a lower cost compared to traditional credit card payments.

An important factor for me was that I could tap into my existing line of credit without opening a new line, which could have implications for my mortgage application. To ensure that my credit score wouldn’t be affected, I utilized a score simulator provided by my bank. Since I didn’t have any other debts at the time, the simulator indicated that the slightly higher utilization of 8% would have no impact on my credit score. This gave me peace of mind and made the process hassle-free.

Compared to other “Buy Now Pay Later” services like Affirm, AfterPay, or PayPal which are advertised at checkout, I didn’t initially plan to split my purchase. The option to use My Chase Plan conveniently appeared within the app, and I likely wouldn’t have considered it if I had to download another app or take additional actions during checkout. Given the potential impact on my mortgage prospects, I would have rejected any payment plan that required an immediate decision at checkout. My Chase Plan provided the necessary flexibility without the same credit implications.

The plan itself was straightforward to understand, with fixed monthly fees and principal repayments. Most importantly, there were no penalties for early repayment of the balance, allowing me to bring my card balance to zero at any time if needed.

Consideration of inflation

Inflation erodes purchasing power, and its rate has been relatively high recently. When considering spending today’s dollars and repaying with future dollars, it’s crucial to evaluate the real or effective interest rate that accounts for changes in price levels. My Chase Plan offered rates below the prevailing inflation rate, making it a favorable option for me. This is similar to the advantage student loan holders have experienced in recent years.

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Paying off the My Chase Plan early is penalty free and saves more interest than you might think

While reviewing my decision to use My Chase Plan, I realized that my initial cost estimate overlooked a significant detail. I assumed that the balance would remain unchanged until I repaid the full amount, but the plan actually involved six equal payments with a fixed fee each month. As a result, the effective rate increased as the remaining balance decreased over time. Analyzing the scenarios, I found that the effective rate over the six-month plan increased each month to a maximum of 9.5% in the sixth month.

Payoff during	Effective rate during corresponding month
Month 1	0.0%
Month 2	3.7%
Month 3	5.4%
Month 4	6.7%
Month 5	8.0%
Month 5	9.5%

Chase Pay Over Time Pros

• Affordable: Offers surprisingly low interest rates compared to traditional credit cards.
• Flexibility: Allows users to choose from various repayment periods, with discounted fees for shorter terms.
• Convenient: Activated directly from transaction history within the Chase app, eliminating the need for additional apps or actions at checkout.
• Limited credit score impact: Utilizing existing line of credit without opening a new one during important financial processes, such as mortgage applications.
• Transparent and no penalties: Clear understanding of fixed monthly fees and principal repayments, with no early payment penalties.

Chase Pay Over Time Cons

• Potential higher effective interest rate: The effective rate increases over time as the remaining balance decreases, leading to higher costs in the long run.
• Accumulation of debt: While convenient, using the feature may tempt users to accumulate more debt than originally planned.

Chase Pay Over Time Use Cases

Given the pros and cons of the Pay Over Time feature, here are some potential use cases:

• Prepaying services with discounts: Use the flexible payment plan to take advantage of discounts offered by other financial services or utilities, such as prepaying six months to a year of car insurance premiums or prepaid cell phone plans. This allows you to benefit from the discount while spreading out the payments over a few months.
• Managing cash flow during major financial events: When facing important financial events like closing on a house, the My Chase Plan can provide flexibility by allowing you to have more liquidity for expenses like closing costs and moving costs without the need to sell investments or disrupt your financial situation.
• Budgeting for larger purchases: If you have a larger purchase in mind but prefer not to pay the full amount upfront, the My Chase Plan allows you to divide the payment into smaller, manageable monthly installments. This can help you budget effectively and avoid straining your finances.
• Taking advantage of lower borrowing costs: When the inflation rate is high, using the My Chase Plan to make purchases and repay them over time can be advantageous. By repaying with future dollars that are worth less due to inflation, you effectively benefit from a lower borrowing cost than paying with today’s dollars.

What do you think? Have you used BNPL or other short-term credit offered by banks?

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