What do shoppers do when they need to buy something but don't have the money on hand? In Japan, a credit card bonus payment is an attractive payment option that allows the customer to postpone payment for a purchase.

As a business owner, you can reach more customers by familiarizing yourself with the way bonus payments work and expanding your credit card payment options to include this method. In this article, we’ll explore how bonus payments work, including when customers can make bonus payments, the interest associated, and the advantages and disadvantages.

What’s in this article?

• Bonus payments explained
  
• Advantages of bonus payments
  
• Disadvantages of bonus payments
  
• Points to consider when using bonus payments
  
• Other credit card payment methods
  
• How to use bonus payments
  
• Bonus payments frequently asked questions (FAQs)
  
• How to support bonus payments
  

Bonus payments explained

By using a credit card to make a purchase, a shopper is effectively deferring the payment for an item. In Japan, there are various ways to pay off credit cards after making purchases, including bonus payments. There are two types of bonus payments: one-time bonus payments and two-time bonus payments.

How they work

In Japan, it is common for companies to give their employees bonuses on a semi-annual basis—typically summer or winter. Bonus payments allow workers to pay off a credit card in a lump sum after receiving one of these seasonal bonuses. In the case of two-time bonus payments, the total payment amount gets split in half and paid in two installments from one of those summer or winter bonuses. This method is useful for buying expensive items which are difficult to pay for upfront, or for otherwise deferring payments.

While the term “bonus payment” might sound like an option only for people who receive bonuses from their jobs, this isn’t the case. People who don’t receive bonuses can also use this service as long as they are able to pay the lump sum at the required time.

Interest

Bonus payments are not subject to the same interest charges as other credit card payment methods. In contrast, installment payments and revolving payments let customers pay off their credit cards in smaller amounts, but customers must also pay higher interest rates of 15-18%. For people who want to avoid paying interest, one-time bonus payments are therefore an attractive option. Bonus payments tend to be more suitable for people who are unable to make payments straight away, but are likely to be able to make their payments within a few months.

Unlike one-time bonus payments, two-time bonus payments are subject to interest. However, many credit card companies offer lower interest rates on this option compared to installment and revolving payments, so the total credit card payment amount might still be lower over all. As such, it’s a good idea for shoppers to compare payment options to see which works out to be cheaper before making a payment method decision.

Payment dates

Bonus payment dates vary by credit card company. Companies in Japan usually pay summer bonuses in late June or early July, and winter bonuses in early December, so many credit card companies set August and January as the respective months for bonus payments.

When a customer selects a lump-sum payment option, the payment dates will correspond to the date of the purchase. For example, if the customer makes the purchase between mid-November and mid-June, they will make a summer bonus payment. If a customer makes a purchase between mid-June and mid-November, they will make a winter bonus payment. Customers should generally expect to make their lump-sum payments two to eight months after their purchases. They also cannot defer bonus payments to the following year’s bonus period.

Advantages of bonus payments

Credit card bonus payments offer a variety of advantages. This section looks at some of these advantages.

No interest

There is no interest charged on singular, lump-sum credit card payments. Saving on interest is a wise decision when making a large purchase.

Deferred payments

Customers can defer payments until after they get their bonuses, which can reduce their monthly outgoings and makes it easier to manage household finances.

Easy to make expensive purchases

Large appliances, furniture, and other expensive items are often difficult to pay for upfront. Bonus payments make it easier to make large purchases as they allow people to set aside more money while avoiding the interest charges associated with revolving and installment payments.

Disadvantages of bonus payments

Bonus payments have many benefits, but there are also a number of disadvantages.

Lower credit limit

Bonus payments take up part of the credit limit on a credit card, reducing the amount of credit available to the cardholder. While deferred payments are a benefit, they can also be inconvenient, as a person’s access to credit is smaller until they make their bonus payment.

Inability to switch to bonus payments later on

The customer must choose a bonus payment as their payment option at the time of purchase. They can’t switch to this option later, so they must carefully consider their options before completing transactions.

Risk of not receiving bonuses

There is always a risk that a person won’t receive a bonus or the bonus will be lower than the person expected due to poor company performance.

Points to consider when using bonus payments

Bonus payments are very convenient and economical if used correctly, but there are a few things people need to keep in mind about them.

Some stores don’t support bonus payments

Even if a credit card supports bonus payments, shoppers can’t use them if a store doesn’t support them. Customers must be sure to check the store they’re considering purchasing from beforehand if they plan to use bonus payments.

Bonus payments can’t be used overseas

Bonus payments are a payment method unique to Japan—they aren’t supported overseas. Generally, shoppers in other countries aren’t asked how they want to pay when they use their credit cards; it’s simply a single payment at checkout. In Japan, customers can typically change their payment options to revolving or installment payments after they use their cards.

Periods when bonus payments can’t be made

Customers can’t usually make bonus payments in the one-month period after the switch between the summer and winter eligibility windows. These periods vary between card companies, so it’s a good idea for customers to check before making a payment method decision.

Other credit card payment methods

What other credit card payment options are there? Let’s take a look at the main payment methods available.

One-time payment

A one-time payment is the most common credit card payment method and is not subject to interest. Payment is made in a lump sum in the month following the purchase. This lump-sum payment option is more suitable for small, everyday purchases that fit into a customer’s monthly budget, as the full amount is due by the payment date.

Two payments

Some credit card companies in Japan offer the option to split a credit card purchase into two payments. Unlike the two-time bonus payment, there is often no interest involved if the customer chooses to make two normal payments. This method is therefore well-suited for relatively large purchases. The customer should always check carefully before using this option, however, as some stores might not accept it or might charge a fee to use it.

Installment payments

With this method, customers divide the total amount owed for goods or services into multiple monthly installment payments. A shopper can specify the number of payments they want to make each time they make a purchase with their credit card. Monthly payments increase each time the shopper makes an additional purchase.

Revolving payments

Similarly, people can divide the total amount owed for goods or services into multiple revolving payments. In this case, however, the monthly payment can be set to a fixed amount regardless of the purchase amount or number of times the customer uses their credit card. Monthly payments can be kept relatively small, but the drawback is that the customer will need to make payments over a longer period of time.

How to use bonus payments

Bonus payments are a popular payment option in Japan. Some customers might be unfamiliar with how to use them, but it’s easy to select this method when making a purchase.

When shopping in-store

When a customer pays at the cash register, they simply tell the cashier that they want to make a bonus payment.

When shopping online

The customer must select “Bonus Payment” at checkout.

It’s important that the customer selects the bonus payment option when they pay, as they can’t switch to bonus payments after making the initial purchase.

Bonus payments frequently asked questions (FAQs)

When are bonus payments not available?

Periods when bonus payments are unavailable vary between companies. These periods are usually about a month long and occur during the changeover period between the summer and winter bonus periods.

Can a bonus payment be split into two installments?

Shoppers can choose two-time bonus payments as a payment method if both their credit card company and the store accept the option. However, unlike a one-time bonus payment, the two-time bonus payment is often subject to interest.

What are the reasons a bonus payment could be unavailable?

A bonus payment might not be possible for the following reasons:

• The store doesn’t offer bonus payments as a payment option.
  
• The maximum credit installment limit has been reached.
  
• It’s outside the eligible time period for bonus payments.
  
• There is a set minimum amount applicable for bonus payments, and the customer has not met it.
  

How to support bonus payments

Credit card bonus payments are a convenient and advantageous payment method for large purchases or when funds aren’t immediately available. You can increase your business’s visibility by introducing interest-free bonus payments, as well as revolving and installment payments.

Stripe is currently preparing to support installment payments, revolving payments, and bonus payments for credit cards in the Japanese market. The beta version is currently available for testing, so if you are a business owner and you are interested in trying it, please contact us.