If you’ve ever made a big purchase, like a car, you’ve probably made a payment in installments. An installment payment, simply defined, is a sum of money paid in smaller parts over a fixed period of time. An installment payment plan is a recurring payment that gives customers flexibility to make larger purchases without having to pay for them up front. Donations to charity can also be made in installments, and both the donor and the charity benefit: The charity improves its chances of getting a larger donation, and a donor gets to pay in a way that’s convenient.
A recurring payment is an automatic payment charged to a customer’s credit/debit card or deducted from a bank account. Merchants must first get permission from the consumer, and the payment is automatically charged each time the payment is due until the customer notifies the vendor. The consumer can retract permission at any time. Recurring payment options are offered for almost any ongoing service such as membership, a cell phone service, or online video streaming subscription. Donations can also be made with recurring payments.
The main difference between an installment and recurring payment is the end date. In an installment payment plan, there is always a known date of when the balance is completely paid off. A recurring payment plan that is not paid in installments may not have an end date – the payment can recur until the customer retracts permission or goods/services paid for are discontinued. Having both installment and recurring payment options available (when possible) gives consumers added value, flexibility, and convenience – which is proven to increase spending and revenue.
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