Revolving payments have recently gained popularity in Japan as a credit card payment method. This is largely because they allow customers to keep their monthly bill the same each time. Although revolving payments help buyers manage their cash flow, the high fees often increase long-term costs. For businesses, late dues by customers negatively impact their cash flow and operations. Businesses must be ready to help customers select the right payment method.

This article will explore lump-sum repayment of this plan to lower revolving payment fees.

What’s in this article?

• Advantages of lump-sum repayment of revolving payments
  
• How to repay revolving payments in a lump sum
  
• Billing methods for lump-sum repayment of revolving payments
  
• What to consider when repaying revolving payments in a lump sum
  
• Other methods to reduce fees for revolving payments
  
• FAQs about lump-sum repayment of revolving payments
  
• Creating a trouble-free payment environment
  

Advantages of lump-sum repayment of revolving payments

Revolving payments have high fees, so buyers can take a long time to settle their balance, especially if they continue adding to their outstanding amount. Paying if off in a lump sum resets the repayment burden, avoiding unnecessary charges. Here are some of the benefits of eliminating this type of debt in one go:

Reduces fees

Buyers might not worry much about revolving payments when their balance is low, but if they use their credit cards frequently, their owed amount increases significantly. In the end, they will pay more interest than the initial purchase was worth, and small, set installments won’t go far. Individuals can save a lot on fees by paying off their revolving balance in one lump sum.

Increases the usable credit

By settling your due balances in one go, customers have more credit available for purchases. This allows them to handle unexpected expenses and have more security in their day-to-day affairs.

Building a credit report

When buyers clear their revolving payments in a single transaction, their repayment can be recorded positively on a credit report. Using this approach wisely will make it easier to pass future financing checks.

Reduces the stress of repayment

By paying off revolving debt in one lump sum, buyers eliminate the burden of interest charges and cut the amount of their monthly installments, helping reduce overall financial stress.

How to repay revolving payments in a lump sum

The exact process for changing this structure to a single payoff will vary slightly depending on the card company or bank a consumer uses. In general, revolving payment users need to follow these steps to make a lump-sum repayment for it:

1. Confirm the outstanding balance
   
2. Contact your credit card company, notifying them you want to make a lump-sum repayment
   
3. Make the payment using the specified method (ATM, direct debit, bank transfer, etc.)
   
4. Cancel the revolving payments setting and switch to regular billing
   

Billing methods for lump-sum repayment of revolving payments

Let’s examine the lump-sum repayment approaches each of Japan’s major credit card companies offers:

ATM payment

Depending on the credit card company, you can make a lump-sum repayment at an ATM affiliated with the same institution or at a convenience store. First, check your card company’s website or customer support to see if a single settlement from an ATM is possible. If so, you must confirm the fees, when repayment can be made, and any other restrictions.

Direct debit from a bank account

To make a one-time settlement of revolving payments via direct debit, you’ll need to follow a few steps first. If you complete the procedure by the application deadline, the charge will be automatically deducted on the next billing date. If there isn’t enough money in your account to cover the entire amount, the lump-sum repayment might not occur, and you could continue to use the revolving payment system as normal, so be sure you have enough funds in your account.

Bank transfer

First, you must take some steps to settle by bank transfer. After applying for lump-sum repayment, transfer to the specified bank account.

What to consider when repaying revolving payments in a lump sum

We’ve seen that making lump-sum repayments effectively reduces the fees and interest you pay. However, there are a few things you need to consider when using this method.

If you make a lump-sum repayment, you will still be charged the fees for that month

Because the charge for revolving payments accrues daily, you’ll still incur the current month’s cost when you choose to pay off the balance in one full transaction. If you decide to make a lump-sum payment, check how much the total will be, including any fees.

Refinancing into a stopgap card loan

If the charge rate on a card loan is lower than the interest rate on a revolving payment plan, you can refinance to a card loan and repay the original as a lump sum. This option might be a good idea if you can save on fees and shorten the repayment period. Still, like revolving payments, a card loan is ultimately borrowed money that must be repaid. Make sure you aim to pay it back before you take out a stopgap credit card loan.

Other methods to reduce fees on revolving payments

To make a lump sum repayment, you will need to save a large amount of money; in some cases, this can put pressure on your household finances. Some people have the funds to clear their loans in full but choose not to. Next, we’ll look at ways to save on fees for this arrangement without making a lump-sum repayment for people who can’t or don’t want to make a one-time payoff.

Advance repayment

Advance repayment is a good option if you’ve saved some extra cash. Interest on these credit plans is calculated every day based on the daily balance. We recommend paying off your loan immediately to reduce your total charges. If your revolving payment plan uses a principal repayment type, the portion of your advanced contribution will be applied to the principal. This means you can effectively lower the fees you’ll owe.

Increase the payment amount

Increasing your monthly contribution can reduce your charges and shorten the payment period.

FAQs about lump-sum repayment of revolving payments

Can revolving payments be changed to a single settlement?

Once you start this arrangement, you cannot change it to a single settlement. That said, you can repay early with a lump sum or prepayment if you want to reduce your total charges.

How long will it take to repay ¥500,000?

The results will vary according to the amount borrowed, the interest rates, and the payment method.

• Amount borrowed: ¥500,000
  
• Fee rate (annual interest): 15%
  
• Monthly payment amount: ¥10,000
  

Based on those numbers, here are the results when calculating using the fixed principal calculation (via JCCA shopping with revolving payments):

• Number of repayments: 50
  
• Total repayment amount: ¥653,191
  
• Fees: ¥153,191
  

Repayment will take four years and two months.

How long will it take to repay ¥1,000,000?

Let’s calculate using the fixed principal method for the same rate and monthly instalment as the above ¥500,000 example.

• Amount borrowed: ¥1,000,000
  
• Fee rate (annual interest): 15%
  
• Monthly payment amount (excluding fee): ¥10,000
  

The results will be:

• Number of repayments: 100
  
• Total repayment amount: ¥1,618,881
  
• Fees: ¥618,881
  

In this case, repayment took eight years and four months. While the amount borrowed doubled (¥500,000 to ¥1,000,000), the total paid back was much more than that.

Creating a trouble-free payment environment

Although revolving payments are a convenient way to handle your credit card, the fact that fees can become a burden is a drawback. A lump sum repayment can cut the overall cost and shorten the billing period.

Analysing the billing patterns of customers who use this structure and supporting them with solid payment plans can create stable, long-term relationships for businesses. Businesses aiming to offer flexible billing options that help customers stay on track must understand lump-sum repayments and other ways to reduce costs.

Stripe is preparing to support three credit card–based options in the Japanese market: instalment payments, revolving payments, and bonus payments. A preview version is currently available for testing, so if you are a business owner interested in trying it, feel free to contact us.