What Is an Installment Plan?
Paying for a purchase in fixed monthly amounts over a set number of months, at 0% or with interest, instead of all at once.
An installment plan turns one price into equal monthly payments with an end date. Card issuers offer them on purchases, sometimes at 0% through partner stores and sometimes with interest. In the Philippines that interest is quoted as a monthly add-on rate on the original amount, which the central bank (BSP) caps at 1% a month for card installments under Circular 1165. Banks such as BDO and Metrobank say in their terms that the whole purchase is deducted from your available credit limit and freed up as you pay.
An add-on rate looks smaller than it is. It is charged on the original amount every month, even as what you owe shrinks, so the effective interest rate (EIR) is much higher: about 1.5 times the add-on rate on a 3-month plan and about 1.7 to 1.8 times on plans of 6 months or longer. Philippine lenders must disclose the EIR under the Truth in Lending Act and BSP rules. Compare the cash price, any fees and the effective rate before you pick a plan.
A ₱24,000 phone over 12 months at a 1% monthly add-on rate is ₱2,000 of principal plus ₱240 of add-on, so ₱2,240 a month and ₱26,880 in total. The effective rate works out to about 1.79% a month, close to double the 1% you were quoted.
Key points
- Fixed payments with a fixed end date.
- A monthly add-on rate understates the real cost.
- Compare the cash price, fees and effective rate.
Put it to use
Sources BSP Circular No. 1165 (2023): credit card ceilingsBSP Circular No. 730 (2011): Truth in Lending disclosure and EIRBDO installment terms and conditionsMetrobank special installment terms Checked October 2026. Rules and fees vary by issuer and country; your card agreement has the final word.
Carrying a balance? Put every card and plan in one place, then pick a payoff order.