(New York, NY): Shoppers purchasing a new iPhone have two choices at checkout—pay up to $1,500 up front or go on a $60 per month payment plan. It is a familiar set up for anyone who has taken out a home, auto, or student loan: Buy now; pay over time.

Similar plans are emerging in several consumer categories beyond cell phones. Networks, issuers, merchants, and marketplace lenders offer plans in-store and online for consumers who want to pay in installments. Auriemma Research’s latest issue of The Payments Report asked payment cardholders about their appetite for point-of-sale installment plans and found that consumers who exclusively use or prefer debit cards are most likely to consider using them, even for everyday items.

Installment plans have historically been used for larger purchases like furniture and household appliances. However, offers for small to mid-size purchases have increased in popularity at the point-of-sale and sometimes post-purchase, making a range of purchase types possible. Providers like Affirm, American Express, and Amazon offer consumers the option to buy now but pay over a specified period (with transparent terms and pricing). While the specifics differ slightly by provider, the core offering remains the same: a consumer doesn’t need to pay for their entire purchase at once.

This product has wide appeal but resonates most strongly for debit users. Four-in-ten would consider using an installment plan for everyday purchases like groceries and household items. The option allows them to access credit in a way that provides more control, making purchases more manageable, and ultimately more affordable.

Six-in-ten debit cardholders find point-of-sale installment plans attractive, but many have never been offered one. Only 28% of debit cardholders report being offered an installment plan in-store, while more (45%) recall being offered one online. Regardless of channel, both groups that recalled offers reacted positively. Over four-in-ten debit cardholders enrolled in at least one of their in-store (48%) or online (41%) installment plan offers at the point-of-sale. Installment plans appeal to credit cardholders, as well: Although only 17% of credit cardholders received an offer to pay for purchases in installments, 51% of those offered do enroll.

“The structure of an installment plan is very attractive to debit cardholders,” says Jaclyn Holmes, Director of Auriemma Research. “And while credit cardholders have the option of paying off their card balance at their leisure, they, too, clearly have an appetite for something a bit more concrete.”

For many, borrowing via an installment plan is less intimidating than revolving on a credit card. According to a recent issue of The Payments Report, about seven-in-ten cardholders feel installment plans are helpful in budgeting expenses and that they help alleviate the stress of making large purchases. Overall, cardholders appreciate that installment plans provide a time period to pay off the balance.

Understandably, bigger ticket items like electronics, home appliances, and furniture top the list of purchases placed on point-of-sale installment plans, but nearly one-quarter used the product to purchase clothing, and 17% for a shopping cart of items.

“Whether for purchases large or small, installment plans are redefining how consumers view affordability, particularly for those without credit cards,” says Holmes. “Some cardholders find the uncertainty and responsibility of paying back money borrowed on a credit card intimidating, whereas installment plans provide a clearer path and time frame for repayment.”

Survey Methodology

This Auriemma Research study was conducted online within the US by an independent field service provider on behalf of Auriemma Group (Auriemma) in February 2019 among 800 adult debit cardholders. The number of interviews completed for both is sufficient to allow for statistical significance testing among sub-groups at the 95% confidence level ±5%, unless otherwise noted. The purpose of the research was not disclosed, nor did respondents know the criteria for qualifying. The average interview length was 25 minutes.

About Auriemma Group

For more than 30 years, Auriemma’s mission has been to empower clients with authoritative data and actionable insights. Our team comprises recognized experts in four primary areas: operational effectiveness, consumer research, co-brand partnerships, and corporate finance. Our business intelligence and advisory services give clients access to the data, expertise and tools they need to navigate an increasingly complex environment and maximize their performance. Auriemma serves the consumer financial services ecosystem from our offices in New York City and London. For more information, call Jaclyn Holmes at (212) 323-7000.