How to keep track of installment purchases

In a nutshell

In Brazil, it is very common to split a card purchase into equal monthly installments. Each one looks small on its own. The problem shows up when several installments fall in the same month. To stay in control, add up the installments for each of the coming months and compare that with your income. Also remember that your card limit stays tied up by what you still owe.

Why installments are tricky

An R$ 100 installment fits in your pocket. Three installments from different purchases in the same month are another story. We call these overlapping installments: purchases made in different months that end up being charged together.

Another point is the tied-up limit. When you split a purchase, the bank takes its full amount from your limit, not just the first installment. With each statement you pay, the limit comes back little by little.

Example

Paulo earns R$ 4,000 a month (R$ is the Brazilian real) and has a card with a R$ 5,000 limit. He made three interest-free installment purchases in different months:

• January: a fridge for R$ 2,400 in 8 installments. R$ 2,400 ÷ 8 = R$ 300 a month, on the February to September statements.
• February: a phone for R$ 1,200 in 6 installments. R$ 1,200 ÷ 6 = R$ 200 a month, on the March to August statements.
• March: sneakers for R$ 300 in 3 installments. R$ 300 ÷ 3 = R$ 100 a month, on the April to June statements.

Adding up the installments on each statement:

• February: R$ 300
• March: R$ 300 + R$ 200 = R$ 500
• April, May and June: R$ 300 + R$ 200 + R$ 100 = R$ 600
• July and August: R$ 300 + R$ 200 = R$ 500
• September: R$ 300

The total paid over the months is R$ 300 + R$ 500 + R$ 600 + R$ 600 + R$ 600 + R$ 500 + R$ 500 + R$ 300 = R$ 3,900. That equals R$ 2,400 + R$ 1,200 + R$ 300.

At the start of April, 6 fridge installments, 5 phone installments and 3 sneaker installments are still left. That is 6 × R$ 300 + 5 × R$ 200 + 3 × R$ 100 = R$ 1,800 + R$ 1,000 + R$ 300 = R$ 3,100 tied up in the limit. That leaves R$ 5,000 − R$ 3,100 = R$ 1,900 free.

Paulo chose a personal rule: at most 10% of his income in installments each month. That is R$ 4,000 × 10% = R$ 400. In April, May and June, he goes over the cap by R$ 600 − R$ 400 = R$ 200. Before splitting his next purchase, he will wait until July.

The 10% is only a starting point. People with many fixed bills may need a lower cap. What matters is having a number and sticking to it.

Step by step

1. Open your card statement and list each installment purchase: installment amount, how many are left and the month it ends.
2. Add up the installments for each of the coming months. Find the month with the highest total.
3. Choose a monthly cap for installments. Start, for example, with 10% of your income and adjust it to your situation.
4. Before splitting something new, add the new installment to your busiest month. If it goes over the cap, wait or save up to pay in one go.
5. In Meu Gasto, record the purchase on your card as an installment purchase. The app spreads the installments over the right statements and shows how much is already committed in the coming months.
6. Use the app's "Ask" feature to simulate the purchase before you make it. The simulation does not save anything.

Common mistakes

• Looking only at the installment amount. R$ 100 seems small, but it adds up with the others. Always check the total for your busiest month.
• Forgetting the limit is tied up. An R$ 2,400 purchase takes R$ 2,400 from your limit, not R$ 300. Check your free limit before counting on it.
• Splitting everyday spending. Groceries and pharmacy bills in installments pile up month after month. Save installments for bigger, planned purchases.
• Assuming "interest-free" always equals the cash price. Sometimes paying at once comes with a discount. Ask and compare first.