An installment is when a credit card transaction is split into a set number of payments made to the bank on a monthly basis.
For example, if a 100 TL transaction is split into 5 installments, the cardholder pays the bank 20 TL each month and completes the full 100 TL payment by the end of the 5th month.
Banks charge merchants different commission rates for single-payment and installment transactions. The commission for installment transactions is usually higher. For this reason, merchants also tend to pass this difference on to the customer. (Even though this is legally prohibited.)
For example, while the cash/single-payment price of a product may be 100 TL, the price with 3 installments may be 105 TL. For this reason, it is important to check both the single-payment and installment amounts before completing a purchase.
How installments affect the merchant
When a cardholder makes an installment purchase, the merchant usually receives the full sale amount from its bank without waiting, or according to an agreed schedule. The installment option is actually provided to the cardholder by the card-issuing bank. For this reason, the bank charges the merchant a higher commission for installment transactions than for single-payment transactions.
Installments and limit
In an installment purchase, the total transaction amount is deducted from the card limit at the time of the transaction. As the cardholder pays each monthly installment, the limit becomes available again by the amount of the installment paid. For example, if a 600 TL purchase in 3 installments is made with a card that has a 1,000 TL limit, the available limit drops to 400 TL.
Legal restrictions
In Turkey, the maximum number of installments allowed for credit card transactions is set by regulation according to sector. In some sectors, installments are prohibited altogether. Since these limits can change over time, the current rules should be followed through BDDK (Banking Regulation and Supervision Agency) regulations.
Installment deferral and converting to installments afterward
Banks may also offer cardholders options such as converting a purchase that was originally made as a single payment into installments afterward, or deferring the first installment to a later date. Whether interest or fees apply to these options varies from bank to bank.
