What are Deferred Payments?
When you lack immediate funds or prefer not to make a lump-sum payment, deferred payment offers from retailers and banks, especially during sales seasons, become a common choice. According to the National Inclusion Finance Survey (ENIF) 2024 by the National Institute of Statistics and Geography (Inegi), 15.7% of Mexico’s population owns a bank credit card, while 22.6% possess departmental credit cards. This opens the door to various deferred payment promotions for different purchases.
A Paypal study indicates that 40% of Mexicans frequently use their credit cards for the option to pay in installments without interest, a payment method used by 90% of them.
How Deferred Payments Work
Fernando Ávila, Santander’s financial education coordinator, explains that deferred payment offers involve splitting a purchase amount into 3 to 36 monthly installments, depending on the promotion. These can be interest-free if paid on time or with interest for larger purchases with fixed payments.
Valeria González, Finanzas que Valen’s founder, clarifies that deferring a payment doesn’t mean postponing it but rather spreading the cost over monthly installments.
These arrangements can be made directly at the bank’s terminal during purchase or through the bank’s app if it’s a card benefit.
Ávila adds that the total purchase amount is “frozen” on your credit line, meaning you cannot use that money for other purchases in the same month.
Use Deferred Payments Wisely
Using payment plans, whether with or without interest, commits a portion of your income for upcoming months. Experts advise using them cautiously.
“It’s better to apply them to expensive, durable goods like appliances or electronics that will remain useful once paid off,” advises Ávila.
Both experts agree that you should not engage in these schemes just because they’re available but only after evaluating your payment capacity throughout the term.
“The consequences of using them without certainty of future income include insolvency, missed payments, and subsequently, late fees or additional charges,” warns González, who recommends considering long-term implications before deferring a purchase.
Key Questions and Answers
- What are deferred payments? Deferred payments, also known as installment plans or buy now, pay later options, allow you to split the cost of a purchase into smaller, manageable monthly payments.
- How do deferred payments work? You agree to pay a fixed amount over an agreed period, typically between 3 to 36 months. These can be interest-free if paid on time or with interest for larger purchases.
- When should I use deferred payments? Use them cautiously for significant, durable purchases like appliances or electronics that will remain useful once paid off. Avoid using them just because they’re available.
- What are the risks of misusing deferred payments? Mismanagement can lead to insolvency, missed payments, late fees, and additional charges, negatively impacting your future purchasing power.
