Credit Card Installments Have Reshaped Impulse Buying

Financial institutions and merchants face a persistent challenge: enabling consumers to navigate the inevitability of large, unplanned expenses without undue friction or financial strain.

From emergency car repairs and essential appliance replacements to significant impulse buys like high-end electronics, these purchases, often costing hundreds or thousands of dollars, frequently fall outside typical household budgets.

Recent research sheds light on this critical area, highlighting the central role of credit and, increasingly, the strategic appeal of credit card installment plans in meeting consumer needs for financial flexibility when it matters most.

Large unplanned purchases are a regular occurrence for consumers, as detailed in “Managing Unplanned Expenses: How The Pay Later Economy Fits Consumer Needs,” a PYMNTS Intelligence and Splitit collaboration.

Large, Unplanned Expenses

In the past year, more than one-third of shoppers spent at least $250 on an emergency purchase, with the same share making an impulse purchase of that size in the last three months. The median cost for these emergency purchases over $250 was $605, while impulse buys of the same size averaged a median of $497. Common items include necessities like auto parts (median $574 emergency) and products for home maintenance and repairs (median $2,112 emergency), as well as appliances (median $774 emergency).

Because these expenses are unexpected and often exceed readily available cash, the payment method becomes particularly important.

Consumers are most likely to turn to credit for these unplanned transactions, using it for about half of their recent impulse and emergency purchases that cost over $250.

Credit cards are the predominant choice among credit options, used by 35% for impulse buys and 33% for emergency expenses.

Within the realm of credit card usage for these large, unplanned purchases, a significant trend emerges: the appeal of installment plans. Rather than simply revolving the balance, a substantial share of consumers opt to pay off these purchases over time using a set number of installments. While 48% of consumers who used a credit card for their latest impulse purchase chose to pay it off in full, 30% opted for installment plans. Excluding baby boomers, 36% of consumers who paid with a credit card for an impulse purchase used an installment plan offered by either the issuer, merchant, or a third-party service.

This preference for structured installment payments is particularly pronounced among younger consumers. Generation Z, for example, shows a strong inclination toward installment plans when using credit cards for unplanned purchases. For impulse buys over $250 paid with a credit card, 45% of Gen Z consumers used installment plans. This usage is split between merchant or third-party plans (30%) and plans offered by the card issuer (15%). Similarly, for emergency purchases paid with a credit card, 52% of Gen Z used installment plans, with 29% using merchant/third-party options and 23% using issuer plans.

This widespread appeal across younger generations and Gen X, particularly when compared to revolving credit, suggests a strong demand for easy-to-manage payment options that provide a clear payoff schedule.

The Certainty of Approval

A key factor driving the choice of payment method for impulse purchases is the certainty of approval. For credit card users, knowing the purchase would be approved was a key consideration for 40% of consumers. This highlights the value consumers place on predictable access to funds for spontaneous or urgent needs. Credit card installment plans, offered within an existing credit relationship, inherently provide this certainty without requiring new credit applications or steps.

Demographic trends underscore the growing importance of providing flexible credit solutions. Younger consumers and parents are not only more likely to make unplanned purchases but also express greater concern about their ability to cover emergency expenses. Notably, large shares of younger shoppers, particularly millennials (26%), anticipate increasing their impulse spending in the next year, often due to improved financial situations or stable employment.

For financial institutions and merchants, ensuring that consumers, especially these key demographics, have access to appropriate credit tools, such as readily available credit card installment plan options, is crucial for both facilitating consumer spending and helping them manage their finances effectively in the face of the unexpected.