PayPlan by RBC, broken down

Canadian adults will be able to apply for a PayPlan by RBC loan and receive an “immediate reply” as the release notes, following a credit bureau inquiry that doesn’t affect their credit score.

Applications are available in any of the 16 Ikea stores throughout Canada. All an applicant has to do is select the monthly plan that works best for them, agree to the terms, load funds into their mobile wallet and pay at the checkout.

To support the launch of Ikea’s financial services, the company has also integrated the McGill Personal Finance Essentials course for its employees. PayPlan is offered by subsidiary RBC Ampli Inc.

More: Your guide to Buy Now, Pay Later (BNPL) installment plans in Canada

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PayPlan by RBC rules and exceptions

Applicants may select among 0% APR for a 12-month term regardless of the amount borrowed, or if qualified, may be eligible for 9.99% APR for 24-, 36- or 48-month terms depending on the amount borrowed. However, the release notes that offers and plan options are subject to change or cancellation without notice.

The PayPlan loans are not available for Ikea’s food products, gift cards, purchases with IKS kitchen installation services or third-party services not billed by Ikea.

Once your loan is accepted, RBC Ampli may report your loan – including its monthly or final payment status — to credit reporting agencies, which can show up on a credit report and impact your score.

More: Considering an instalment plan? Here’s how to use a payment plan the right way

How instalment plans work

For those unfamiliar with instalment plans, these are short-term loans offered by banks, through store financing, independent lenders, and credit card providers.

It's common for these providers to offer to split a large lump sum purchase into equal payments, over time: This is an instalment plan, also known as a Buy Now Pay Later plan.

By introducing an instalment plan, Ikea is joining dozens of other retailers in providing their customers a way to decrease the upfront cost of large purchases.

Choosing an instalment plan

Ikea's instalment plan is a great, but it's not the only option in the marketplace.

Read More: Are you looking for an instalment plan through an independent fintech or bank? Consider these BNPL plans

If you want to use an instalment plan and collect loyalty reward points, consider using a credit card that offers an instalment loan option.

For instance, American Express offers a Plan It option to its cardholders. Using the Amex PlanIt, you can break up a large purchase over 3 to 12 months. There isn't a set fee to use the Amex instalment plan, but borrowers should do some back-of-the-napkin math to calculate the cost of using Plan It plan. For example, if Amex charged 0.85% and you bought a new Ikea PAX wardrobe system for $1,000 using the Amex Plan It program for a period of 12 months, then the total fee would be $1,000 x 0.85% x 12 = $102. Once activated, the total purchase cost for that new PAX unit would be $1,102 — that means paying just under $92 per month rather than $1,000 as an upfront lump sum.

But to use Amex Plan It you must be an Amex cardholder. Eligible American Express credit cards include:

  • American Express Cobalt: Most cardholders break even on the annual fee after accumulating 1,250 points per month (approximately $750 in spending). For those spending on groceries and food delivery it's easy with 5x the points (although there is a spend cap) and 3x the points on eligible streaming purchases. There's a host of other perks and rewards plus a 1:1 transfer of points from Amex to several frequent flyer or other loyalty programs.
  • American Express Marriott Bonvoy: This card's annual fee of $120 comes with the suite of American Express travel insurance protection and the ability to transfer points to a wide selection of airline or hotel loyalty plans (including Aeroplan).
  • American Express Essential card: There is a $25 annual fee, additional cardholders pay nothing and the card still offers access to the robust list of Amex perks. For instance, get front-of-the-line tickets to a number of events, personalized Amex offers, robust travel insurance and purchase coverage, plus cardholders get access to a variety of short-term borrowing plans that charge much less than payday lenders.

Other cards that offer instalment plans include:

  • MBNA True Line Mastercard: You can choose an instalment plan with various rates, from: 6 months at 4%, to 12 months at 6% and 18 months at 8%.
  • Scotiabank Momentum Visa Infinite Card: This card is ideal for those who spend on groceries, recurring bills and subcription purchases, as you get 4% cashback. Commuters earn 2% cashback on gas or transit purchases with all other purchases earning 1% cashback.

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Nicholas completed his master's in journalism and communications at Western University. Since then, he's worked as a reporter at the Financial Post, Healthing.ca, Sustainable Biz Canada and more. Aside from reporting, he also has experience in web production, social media management, photography and video production. His work can also be found in the Toronto Star, Yahoo Finance Canada, Electric Autonomy Canada and Exclaim among others.

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