In addition to one- and two-time payments, you can make credit card transactions using revolving, instalment (split), and bonus methods. However, consumers do not always have the freedom to choose how they pay, and businesses that sell low-cost items generally require a one-time payment. In contrast, Japanese stores that sell high-priced items often offer split, revolving, and extra payments.

Because the “revolving payment” and “instalment payment” are made in multiple segments, they might appear the same. But, depending on your choice, the monthly amount and the number of payments you make will change. This is why it is important to understand the differences and use the most suitable option.

In this article, we’ll explain the differences between revolving and instalment payments in Japan, as well as key points and the pros and cons of each.

What’s in this article?

• Revolving vs. instalment payments: Key differences
  
• Pros and cons of paying with revolving credit vs. instalments
  
• Comparing revolving and instalment payment methods
  
• How to choose between revolving and instalment options
  
• Key points about instalments and paying with or without interest
  
• Why some consider revolving credit “dangerous”
  
• Alternative credit card payment methods
  
• FAQs on revolving and instalment options
  
• Preparations for introducing revolving and instalment payments
  

Revolving vs. instalment payments: Key differences

Let’s examine the differences between revolving and instalment payments in more detail. Both are paid in multiple segments, but the mechanisms are very different.

Revolving payments

With revolving payments, you can set the monthly dues to a fixed amount regardless of the total credit card use or the number of times you use it.

The example above sets the monthly payment at ¥10,000. In this case, if you reach the credit card limit, your monthly payment will remain ¥10,000 + a handling fee. Nevertheless, as the balance grows the more you shop, it can become difficult to track when you finish paying off your balance unless you keep a close eye on it.

You can pay in instalments before using your card or when you buy in a store or online.

Instalment payments

Instalment payments differ from revolving plans in that you specify the number of payments for each transaction. If you make additional purchases, you must specify how many parts each time, so your monthly costs will increase with more usage of the card.

You also can’t set the number of instalments yourself. You can only choose from the options set by the credit card company.

In the instalment example, the customer has bought ¥100,000 worth of goods as a five-time split. One month’s payment is ¥20,000 + a handling charge, and the customer pays this for five months (five times) to clear the balance.

You can set up multiple splits when you make your purchase or afterwards.

Pros and cons of paying with revolving credit vs. instalments

Now that you know the difference between revolving and instalment payments, let’s look at the pros and cons of each.

Both revolving and split payments incur a fee, but the company will waive it if you set up two segments for an instalment. For this reason, instalments are a better option if you can pay in two parts.

Comparing revolving and instalment payment methods

Which is cheaper, the fee for a revolving payment or a split approach? Using a specific example with the start date of 1 February 2025 (results will vary depending on the start date), we’ll simulate which option proves more cost-effective.

Comparison under the same conditions (shorter period)

First, we will compare the same conditions with a shorter repayment period.

• Amount borrowed: ¥120,000
  
• Handling fee: 15%
  
• Number of payments: 3
  

The consumer uses the fixed-rate method for the revolving payment, and the principal amount is ¥40,000 per month.

Simulation results:

In this scenario, the charges for the revolving and instalment arrangements were the same.

Comparison under the same conditions (longer period)

When the repayment period was short, the fees for revolving and instalment plans were almost the same. Next, compare the same conditions with a longer repayment period.

• Amount borrowed: ¥120,000
  
• Handling fee: 15%
  
• Number of payments: 24
  

The consumer uses a payment amount for the revolving payment, with a monthly principal of ¥5,000.

Simulation results:

There has been an ¥839 reduction in the cost for the revolving plan. Although many people assume the costs for revolving payments are high, the commission can be lower than for instalments under the right conditions.

Different commission rates

Since the commission rate for revolving plans is higher than that for instalments, we’ll compare revolving payments with an 18% rate and split arrangements with a 15% rate, using the same conditions for the amount borrowed and the number of segments.

Payment method: Revolving
Amount borrowed: ¥480,000
Handling fee: 18%
Payment amount: ¥20,000 (assuming 24 payments)

Payment method: Instalment
Amount borrowed: ¥480,000
Handling fee: 15%
Number of payments: 24

Simulation results:

The instalment payment is ¥11,387 cheaper. The 3% commission rate difference significantly impacts the total amount paid.

Note: The calculation results for the simulation charge are for reference only. Depending on the balance, additional use, and other variables, the actual amount you pay might differ from that calculated by the daily and monthly interest rate calculations.

How to choose between revolving and instalment options

Both revolving payments and instalments have their uses. You need to choose which approach best suits your needs and situation.

When revolving payments are the better option

If you have a fixed monthly income and it is difficult to pay more than a certain amount, you might find it easier to use a revolving option, which allows you to keep your monthly costs more or less the same. It also makes it easier to manage, for instance by making an early repayment when you receive a bonus or a dividend from stocks, etc.

When instalment payments are a better option

Since there is no service charge for up to two instalments, this method can be more cost-effective if you can complete it in two parts. Choosing this option is best if you want to know the due date for payment and have a fixed number of monthly dues.

Key points about instalments and paying with or without interest

There are three types of credit card limits: shopping limit, instalment limit, and cash advance limit. There is a cap to how much you can use, so you can’t exceed the threshold.

Split and revolving payments fall under the instalment cap, and there is a set limit on the amount you can use for instalment plans.

Key points about revolving payments

Some services are not eligible for revolving plans, such as cash advances, insurance premiums, and annual charges, and you cannot use revolving payments for ineligible items. You need to also monitor your spending limit, as you cannot use revolving plans if you exceed it.

Key points about instalment payments

Some credit card issuers might not allow instalment payments. The issuer will also decide the options for the number of parts, and you will have to choose how many segments suit you from among them. Also, like with the revolving plan, if you have exceeded the limit for instalments, you will not be able to use this option.

Why some consider revolving credit “dangerous”

Revolving plans allow you to keep the amount you pay each month more or less the same. For this reason, it appears very convenient at first glance. Despite the widespread use of revolving payments, many people still view them as not a good option or risky.

This section will explore why revolving credit cards might be perceived as “dangerous”.

High handling fees

The handling fees for revolving payments are high. Although they vary between credit card companies, the handling rate for revolving plans is generally set at 15%–18% per year. This is the same level as the interest rate on consumer finance loans. If you borrow a large amount, the balance tends not to decrease easily, prolonging charges.

It’s hard to see how much needs to be repaid

With a revolving arrangement, if you stay within your card’s credit limit, the amount you pay each month will not change regardless if you make additional transactions. Because the amount you pay is the same no matter how much you spend, it is easy to overspend and then find that the total amount you have to pay has increased considerably.

It’s hard to tell when repayments are complete

Unlike instalments, where the number of payments is set, companies determine the repayment completion period for revolving plans by the amount used and the monthly amount. If you make further purchases, the repayment completion period will be extended each time. Regularly check the completion period on your credit card statement to avoid overpaying.

Alternative credit card payment methods

Other ways to pay are available in addition to revolving and split payments.

One-time payment

A one-time or lump-sum charge is the default way to pay with a credit card. The credit card issuer totals the amount used on the due date, and you repay it on the next payment date.

Because there is no handling fee for a one-time transaction and the expenditure is straightforward, it is easy to manage your money and prevent overspending. On the other hand, when you make a big purchase, the monthly bills also increase. Get into the habit of checking your account regularly to avoid situations where you don’t have enough money on the due date.

Bonus payments

Customers usually pay card fees in a lump sum during the bonus month. Since employers generally pay bonuses once in the summer and once in the winter, customers will also make bonus charges with these. That said, each credit card company determines when customers can apply for bonus payments.

There are also one- and two-time bonus payments. However, please note that some credit card companies have periods when bonus offers are unavailable, or there might be no option to pay twice.

FAQs on revolving and instalment options

We’ve compiled a list of frequently asked questions about revolving and instalment payments.

Which is more economical, paying in instalments or with a revolving credit card?

This will vary depending on the amount used and handling charges. Before using the service, run the simulation to calculate the number of repayments and the total amount you’ll owe.

Can the payment method be changed from instalments to revolving plans?

Many credit card companies offer a service that allows you to switch from instalments to revolving plans. Contact your credit card company for details; the response can differ depending on its policies.

Is it possible to use both revolving and instalment methods?

Many credit cards allow you to use both revolving and instalment payments. Still, the availability of these approaches differs depending on the company and card type, so please contact your credit card issuer for details.

Preparations for introducing revolving and instalment payments

This article explained the differences between revolving and instalment payments, their features, and key points. From the user’s point of view, revolving plans are a convenient approach when you can’t pay in one lump sum. Sometimes, people choose revolving arrangements or instalments to buy expensive items, knowing they might incur a handling fee.

Stripe is preparing to support revolving, instalment, and bonus credit card payments in the Japanese market. The beta version is currently available for testing – merchants interested in participating can reach out through Stripe’s contact page.