Paying in installments, the wrong idea for paying for Christmas gifts?

Split payment is increasingly convincing the French. 6 out of 10 say they are ready to change stores to benefit from it. However, this ease of payment carries some risks.

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Paying in two, three, four or even five installments is tempting, but is it a good idea? Split payment, sometimes called BNPL for Buy Now Pay Later (buy now, pay later) is increasingly common, especially online but also in stores and allows you to treat yourself to a product by paying for it in several monthly installments. The offer can be all the more attractive during this end-of-year holiday season when expenses can sometimes add up.

It has met with great success among consumers, more and more of whom are joining it. 70% of French people use payment facilities according to a study conducted by FLOA, a subsidiary of BNP Paribas and the Kantar institute. Among them, 55% regularly use payment in installments for purchases of less than 500 euros, mainly to buy household appliances (54%), high-tech products (53%) and travel (48%). Payment in installments has become a real selling point for brands since 6 out of 10 French people would be ready to change stores in order to be able to use it.

Split payment or consumer credit?

But be careful, paying in several installments still carries some risks. First of all, we must clearly differentiate between a split payment and a consumer credit, which is subject to strict regulations. The Lagarde law (2010) defines it as a credit of an amount greater than 200 euros or a duration greater than three months. While a split payment is supposed to be granted for a period of 60 to 90 days (the duration can be more than three months if the total sum is less than 200 euros) and includes three or four installments for a total amount of a few dozen several thousand euros, defines the Banque de France. Otherwise, it is more of a consumer credit. Which is more protective for the consumer.

In fact, consumer credit is regulated by law. To benefit from it, a file must be created and a contract must be signed. Whereas to pay in several installments, you just need to present an identity document. Subscribing to a split payment “is not conditioned by the prior study of the consumer’s solvency”observes the National Consumer Institute, which can “aggravate certain delicate financial situations” even “increase a situation of over-indebtedness”. This is why it is recommended to ensure that you can pay the monthly payments in full before committing to paying in several installments.

And all the more so since “the consumer does not benefit from the right of withdrawal” and that “fees in the event of payment incidents are not capped” in the case of a split payment unlike a consumer credit. “Late penalties reaching 30 or 40% of the outstanding capital”can then be applied indicates the UFC Que-Choisir association. In the case of consumer credit, penalties are capped at 8%.

Furthermore, split payment is not always offered free of charge. In general, the more due dates there are, the greater the likelihood of having to pay additional fees. Care must be taken to ensure that the total amount of the split payment does not exceed the base price of the product.