Installments allow consumers to pay for a purchase in parts. An installment typically covers one purchase/order and multiple payments over time.
Installments differ from recurring payments because unlike recurring payments it is not a single purchase, but an ongoing service like bills or subscriptions. In an installment transaction, a single transaction is sent to the issuer, which in turn splits the total amount into several monthly payments.
Installment Types
There are two installment types:
issuer-funded (credit installments)
merchant-funded (regular installments).
Issuer-funded (credit instalments)
The bank issuing the card to the consumer offers the installments to the consumer
The bank charges the consumer's account in the agreed number of installments and charges an interest
The merchant receives the total purchase amount at once
The issuer takes the risk
Merchant-funded
The merchant and consumer agree on the number of installments, free of interest fees
The bank charges the consumer's account according to the installment plan between the consumer and the merchant
Merchants receive payments as the bank charges the consumer's account
The merchant takes the risk
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