Are there risks to merchants on 0% installments?

[boybi]

majority of merchants now offer 0% interest on installment terms through credit cards. are these merchants paid in full in advance by the CC companies? or are they also paid by installment? if the CC holder failed to pay his obligations to the CC Co., will the CC Co. also stop paying the merchant?

[mazdamazda]

AFAIK...

If you don't pay in full your CC due, they will charge you the interest for your purchase...

[empy]

may incentives sa merchants yan. my guess is that it's the cc company that basically is issuing you an interest free loan. you get the goods, the merchant gets paid in full, and you pay the cc company the installments.

the merchant doesn't assume any of the risk of default, regardless of whether you charge the full amount on your cc, or if your cc company agrees to offer you installments.

kung di ka magbayad, yung cc company ang talo. but that's their cost of doing business.

[uls]

Credit card companies wouldnt dare not paying the merchants. If they did, merchants everywhere would stop accepting cards issued by them. That would be suicide on the part of the CC company.

[1D4LV]

majority of merchants now offer 0% interest on installment terms through credit cards. are these merchants paid in full in advance by the CC companies? or are they also paid by installment? if the CC holder failed to pay his obligations to the CC Co., will the CC Co. also stop paying the merchant?

before we start, an issuance of a CC is already a risk to the CC company, considering these are loans without collaterals. so the CC already assumes the risk. as far as i know, there are parang legal reserves that each bank can assign to for these kinds of (CC) loans, na parang assumed losses na yan pag hindi nabayaran, they can still write those off as bad loans, without too much losses at their end. but of course, even though you have not paid regularly to the CC company, magbabayad ka pa din through their collection agents, which are already budgeted sa kanila. pag nagbayad, pasok sa income/revenues less bayad sa collection agents. pag hindi nagbayad, losses. that simple.

by paying a 0% interest, this is already included with the risks associated in the issuance of a CC to an individual consumer because the consumer now has the control on where that no-collateral loan will be used.

on the 0%, i think these are already factored out by the establishments and merchants + the CC company. silang dalawa ang naguusap dyan pagdating sa bayaran.

[Zeus]

Merchant paid in full and Credit card companies took the risk The problem with accepting cards now is that the merchant should shoulder the commission earn by the bank, and not the customer. Unlike before 5 to 6% extra charge for credit card charge to customer except high profit margin goods

[empy]

the merchant doesn't care one way or the other. this is how a cc works:

1. you open a cc account with a bank. a cc is essentially an open line of credit (usually up to a certain amount, but some cards like Amex have no preset spending limit) that you can use anytime.

2. you are free to spend up to that limit at any time with any merchant as long as your account is in good standing.

3. every merchant has an account with the cc company as well, which is set up when they sign a contract to accept the card. once you swipe your card, the cc company transfers funds in the amount of the purchase to the merchant's account. the transaction is processed instantaneously, although it may take a couple of days for the funds to actually be transferred (this process is usually called "fulfillment")

4. once the card is swiped and the transaction recorded, the merchant could care less what happens afterward. they already have their money from the cc company. only in special cases, like in case of fraudulent transactions/cards or if the cardholder submits a dispute, would the merchant run the risk of the funds being withdrawn (or "charged back")

5. at that point the terms of payment, and collection of debt, is solely the responsibility of the cc company. they can choose to allow you installments at 0% to incent you to spend more on their card - that is their prerogative.

6. when you pay your debt in full, then you are paying off the cc company's receivable, which also zeroes out the debit balance that the cc company is carrying. that's the whole point of a cc - the cc company/bank advances the merchant the money so you can take home the shiny toy now, and then you pay the cc company later (with interest of course)

[empy]

pahabol - also look at the terms and conditions of these zero interest loans...some of them have very onerous penalties if you pay late. some of them even charge you interest retroactively at a very high rate if you so much as miss a payment deadline :swear:

[Horsepower]

1. Merchants are paid in full regardless of the card transaction or payment arrangements.

2. There's no such thing as 0%. It's all a lie. Interests are already factored in. Consider, you can get discounts on cash but not on card.

[oldblue]

i doubt it. yan naman ang gusto ng bangko aka credit card company, mabaon ka sa utang.

hindi nga sila gano happy sa mga straight payers. yun tipong bili ka ng cellphone ngaun, tapos bayad ka sa cc before cutoff.

yun special installment plan limit ko from 20k to 90k in less than a year. sabi ng bank, kung may bibilin pa daw ako on installment na greater than 90k, puwede pa daw palakihin limit.

ngaun tuloy parang gusto bumili ng 32" samsung lcd tv. hay tukso!

[Horsepower]

Kaya ako puro cash lang. hehe

[empy]

ahihihi....nasabi ni HP in two lines what took me a whole page to say

[Horsepower]

At least, yours is more detailed. :-)

I don't have a card, but facilitate card payments for some of my clients.

[pup2]

i doubt it. yan naman ang gusto ng bangko aka credit card company, mabaon ka sa utang.

hindi nga sila gano happy sa mga straight payers. yun tipong bili ka ng cellphone ngaun, tapos bayad ka sa cc before cutoff.

yun special installment plan limit ko from 20k to 90k in less than a year. sabi ng bank, kung may bibilin pa daw ako on installment na greater than 90k, puwede pa daw palakihin limit.

ngaun tuloy parang gusto bumili ng 32" samsung lcd tv. hay tukso!

hehe. ako ganun. bayad lahat sa cut-off. kung di ko ma-afford mag-cash, i don't buy unless 0% interest (na mahirap i-keep track kaya once ko pa lang ginagamit.)

Bakit ka naman hindi dapat magbayad lahat sa cut-off eh kung mag installment ka ng nonzero interest item, kahit 100 pesos lang 1,500 ang finance charge! Bukod pa yun sa interest ha!

[nicolodeon]

1. Merchants are paid in full regardless of the card transaction or payment arrangements.

2. There's no such thing as 0%. It's all a lie. Interests are already factored in. Consider, you can get discounts on cash but not on card.

Exactly.

[Lucius]

Hahahaha ung laptop ko 12 months to pay 0% interest. Siguro nga may patong na hahaha

[Mguy]

1. Merchants are paid in full regardless of the card transaction or payment arrangements.

2. There's no such thing as 0%. It's all a lie. Interests are already factored in. Consider, you can get discounts on cash but not on card.

This is so true. Case in point; go to the audio/visual stores sa shangrila mall. They sell 32" LCD flat screen TV for PHP 99,000.00 at 0% 12, 18 or 24 months via MasterCard. Now if you pay cash, the same unit will retail at PHP 65,000.00 only. There is your mark up.

[boybi]

This is so true. Case in point; go to the audio/visual stores sa shangrila mall. They sell 32" LCD flat screen TV for PHP 99,000.00 at 0% 12, 18 or 24 months via MasterCard. Now if you pay cash, the same unit will retail at PHP 65,000.00 only. There is your mark up.

ganyan ba kalaki ang mark up sa CC payment?

[oldblue]

'lam ko talaga malaki mark-up pag 0% installment plan.

let's take for example, Apple Imac Computer. sa Mac Center sa SM, around 89k sya na pwede i- 12 mos. payment.

pero I heard there is this distributor/dealer who also caters end users in timog area that offers it at 74k lang, cash. same warranty.

eto list ko na lang mga bad "decisions" ko

I bought an Ipod Video 30GB at 20,500 12 months 0%, a month later found out that you can have it for 16k. just finished paying last month, the Ipod 30GB video is now 10k srp.

I bought a Wow Magic Sing sa Automatic Center late November, around 11k+, nakaka- 3 months pa lang ako. found out na meron pala sa Raon last X'mas, cash nga lang 7k+.

mintik na ako sa Canon 400D na available sa mga canon shops sa mall, 49k puwede 12 mos. 0%. 39k cash sa Hidalgo with bag pa and addl. accs.

lahat with manufacturer warranty din naman.

lakas kumita ng credit card installment scheme.

yun bago type bilhin ngaun, tig 79k na 32" Samsung LCD TV sa Abenson sa Greenbelt. if you pay in 12 mos 0% installment, may free 29" Flat Samsung TV ka pa + a DVD Home Theatre Entertainment System.

pano ka naman makaka-resist, may 32" Samsung LCD TV ka na, may 29" Flat TV ka pa!

buti na lang closing time na nun, and I had a whole day to think the next day. sira-ulo abenson yun, for 79k mintik na ako napabili ng dalawa TV + DVD Home theatre. bale 3 sales in 1 pa hahaha

[larshell]

Zero % is not true. The retail price is jack up para they can absorbed the interest. Gusto ng mga CC co. yan kasi by % ang commission nila. Bigger the amount syempre mas gusto nila. Pero diba jung ayaw mong mapamahal ipon muna. Kasi kung gagamitin mo yong pera nila imposimple na walang interest yon.