Inflation in Germany is at a record level. A price increase of 7.4% was reported for April. ( HERE ) Interest-free installment payments can be a way to get the currently lower price for larger purchases.
Inflation. What is that, actually?
When the entire price level rises, i.e. when not only some prices go up and at the same time prices do not fall elsewhere and the increases are thus offset, then this is called inflation.
For the same shopping basket, the consumer has to pay 7.4% more than in the same month of the previous year, i.e. April 2021.
Larger purchases – now or later?
Anyone planning larger purchases that are not financed from petty cash usually has two options. Either you wait and save until you have enough money, or you finance the purchase on credit. This can be a consumer loan from the bank or one of the many installment payment options offered by retailers or payment service providers. Particularly for smaller sums, installment payments are more likely to be an option.
Anyone who chooses the conservative method of first saving and then buying, i.e. only spending money that is already available from their own resources, is currently running the risk that the price of the coveted product will continue to rise with each month, i.e. becoming more and more expensive . Anyone who opts for loan financing may have to expect considerable interest, which can eat up the advantage of having realized the current purchase price.
Zero interest offers
This is where offers from payment service providers such as PayPal or Klarna currently come into play.
Klarna had already announced in March that it would be introducing a new installment payment option that would be free of charge for customers, i.e. an effective interest rate of zero percent. With this innovation, Klarna wanted to shake up the industry and become significantly more customer-friendly. ( HERE ) PayPal, on the other hand, asked its customers to pay in installments with an effective annual interest rate of 9.99%.
Now PayPal is also following suit and has completely eliminated the effective annual interest rate for payment terms of 3, 6, 9 and 12 months. Small catch: The zero tariff is only available after a credit check and only for amounts between €100 and €5,000. In addition, the zero percent promotion is only valid until June 26th. ( HERE )
With interest-free installment payments, customers can easily purchase a product now, realize the current price and pay later without incurring any additional costs beyond the purchase price.
Outdoing inflation
This is not a privilege of the two payment service providers mentioned, but also applies to all other installment payment options that are offered directly by online retailers, for example. The main thing is that there is an effective annual interest rate of 0.0% and no hidden interest such as processing costs for installment payments.
This can be used to outwit inflation.
Stay sensible
But don't forget: Even if no interest payments are due when paying in installments, the purchase price must be paid in full sooner or later. So it's better not to be unreasonable and only buy what you can actually afford in these times. And keep track of your own installment payment obligations.
Also interesting: inflation. What is that, actually?
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