Should Your Business Offer Payment Plans for Customers? [2023]

Payment plans could increase your cash flow, but there are some risks to consider. Our expert guide explains the potential pros and cons for your business.

Offering payment plans allows your customers to pay for a larger purchase with a series of smaller payments. Although it’s more convenient for you, as a business owner, to get that money upfront, a payment plan can attract more customers, earn more sales, and encourage your customers to make faster purchases.

Still, payment plans don’t make sense for every business. They can even have some negative consequences. Let’s discuss the pros and cons, as well as how to offer payment plans if you do choose to proceed.


What Is a Customer Payment Plan?

Big-ticket items can be tough to pay for. If a customer doesn’t have a credit card or lump sum of cash to use when paying for goods, they may have to abandon the purchase or search for the product elsewhere. 

This is where customer payment plans come into play. Payment plans are a financing tool that allows a customer to pay for a purchase over time with low monthly payments. They are essentially interest-free loans with the condition that the consumer must pay back the loan according to a set timeframe. The consumer may have to pay interest if they don’t pay by the end of that grace period.

These plans are often essential for expensive purchases, like furniture or cars. However, there’s no minimum price necessary for a payment plan. The industry even considers things like streaming media and magazine subscriptions to be payment plans. 

All types of businesses use payment plans, so they can be useful whether you’re selling directly to consumers or to other businesses. For customer-facing businesses, payment plans are sometimes referred to as buy now pay later (BNPL) or layaway plans. In the business-to-business (B2B) space, some people refer to it as consumer financing.

The Benefits of Offering Customer Payment Plans

Offering payment plans can benefit both you and your customers. The biggest reason you’d opt into payment plans is that they can boost your sales. When you break up one payment into several smaller ones, it makes your product or service more accessible to more shoppers. You give them a way to make a purchase when they might have otherwise given up.

These aren’t just customers who don’t have the money to pay the full cost upfront. They’re also folks who can’t qualify for loans because they have no or low credit scores. They could also be smart shoppers who want to maintain their savings and avoid credit card interest and fees. 

Plus, offering payment plans often means more orders. This is because customers are more likely to buy even more products or services from you because they have more free cash. This allows them to buy what they want rather than just what they can afford at that exact moment. 

While it may be nice to have that larger lump sum payment when the customer purchases an item, payment plans also provide you with regular income. You automatically deduct the payments from the customer’s account at set intervals, so there’s no waiting around for late payments. You’ll know exactly how much you’ll earn and when, which provides you with a steady cash flow.

Having payment plans also sets you apart from the competition that doesn’t offer financing. That makes your business even more appealing and could help you take customers from other similar vendors. 

The Drawbacks of Offering Customer Payment Plans

Like most business decisions, there are also drawbacks to consider with payment plans. The first is that it is possible that a customer may walk away without paying back the entire amount. This could happen if their bank account doesn’t have enough funds when the payment auto-deducts. It could also happen if they suddenly close the credit card that they used for the payments.

However, this is fairly uncommon. Customers know that they can damage their financial and credit history if they miss payments, which impacts their future purchasing power. Most people want to avoid this income, so they ensure they have the funds to pay the monthly bill.

If you choose to set up payment plans through a bank, you may face higher fees as a merchant - up to 6% of the purchase amount. Implementing a payment plan also requires some specialized technology and tools to adjust your checkout process, which can be an added expense. 

It’s also important to review your own business to determine if you’re a good fit. These plans are usually best for businesses that sell more expensive services and goods. Additionally, certain types of businesses, like gaming and tobacco companies, aren’t legally eligible.

How to Offer Payment Plans to Customers

Start by deciding which products (if not all) you’ll offer payment plans for. This is easier for services or subscriptions, but more difficult for physical goods because you have to consider your own costs. 

For example, if you sold a watch and it breaks before it’s completely paid for, will you offer complimentary repairs? This is the time for you to set terms, including how you’ll handle servicing, maintenance, and refunds. You’ll share this agreement with the customer before they agree to the plan.

You’ll also need to decide the frequency of payments. Will you require weekly, biweekly, monthly, or annual payments? There’s no right or wrong answer – whatever works for your business and customers.

Next, you’ll set up recurring billing via a payment processor, which will implement automated invoicing and auto-debit. When the customer provides their payment details, you put them into the system which deducts them from the customer’s account on a set schedule. Those payments will automatically stop once the customer has paid for the item in full. Alternatively, subscriptions may continue indefinitely.

The Best Way to Accept Payments from Your Customers 

Payment plans can boost your revenue, but it’s important to choose a payment system that won’t eat away at that profit. Banks, in particular, can have expensive fees for setting up recurring payments. Alternatively, charges a simple flat rate per transaction rather than a percentage, so you can keep more of your earnings. also makes it easy to set up payments. It’s all done through the Pay Dashboard. Here, you can keep track of the status of all your payments, update customer payment details, and view analytics. makes payment plans straightforward and easy, so you can focus on growing your business. Click here to sign up now!

The Bottom Line 

Offering a payment plan can boost cash flow and increase order volume. Although there are some drawbacks, many businesses find that offering financing plans gets them more loyal customers. 

If you’re ready to start offering payment plans, check out As a payment service provider, we make it easy for you to set up a variety of payment methods with just a few clicks. Plus, you can send direct payment requests. Even after you make a sale, offers support via reporting and analytics. Click here to find out how you can get started.


How can my business accept credit card payments?

You can use to accept credit card payments. With your Pay Dashboard, you can easily set up a customized checkout page, send a payment request via email or text, and even enter your customer’s details manually. Click here to get started!

What are payment plans?

Payment plans allow customers to pay for a large purchase in several smaller installments over a set period of time. They’re usually interest-free unless the customer fails to repay the full amount within the agreed-upon term.

How do I set up payment plans for my business?

You can set up a payment plan by using a payment processor to set up recurring billing.

What are some examples of payment methods?

A payment method is anything you use to pay a bill. This includes cash, checks, credit cards, debit cards, mobile payments, electronic bank transfers, Apple Pay, Google Pay, PayPal, and more.

Meet the author
Ginny Dorn
Ginny Dorn is a finance and business copywriter specializing in credit card processing and fintech. She graduated from Western Illinois University with a bachelor's degree in family and consumer sciences.
The Best Way to Accept Online Payments lets you accept credit cards, debit cards, and a wide variety of alternative payment methods. You can easily set up recurring billing and manage all your transactions through your user-friendly Pay Dashboard. No tech experience required!

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