Guide to Upgrade Card: A credit card and installment loan hybrid

For large purchases, the debate between using a credit card or a personal loan is a big one. Credit cards offer more flexibility to make multiple purchases and pay them off over time, but personal loans have structured repayment schedules and competitive interest rates.

But what if you could combine all the best features of both payment methods? Turns out you can. The Upgrade Cash Rewards Visa® aims to provide the flexibility of a credit card with the interest savings and fixed payments of a personal loan. The cherry on top: It’ll give you 1.5 percent cash back on every purchase, when you make payments.

How does the Upgrade Card work?

The Upgrade Card is neither a credit card nor a traditional personal loan — it is a card with a credit line that offers easy-to-use installment payment terms. Qualifying cardholders are offered a default line of credit, APR and repayment term based on their creditworthiness. On every purchase, you’ll also earn unlimited 1.5 percent cash back, and there’s even a sign-up bonus of $200, if you open a Rewards Checking account and spend on your debit card three times within 60 days. All of these features are available for absolutely no fees.

To get started with the Upgrade Card, you’ll first need to apply to see your available credit line and interest rate. If you are approved, you’ll be given a default APR and installment payment term. Possible terms currently include 24-, 36- and 60-month repayment plans, with APRs ranging from 14.99 percent to 29.99 percent. That lowest APR is decent, considering the trend of credit card interest rates right now.

How your credit line works

Your credit line can start from $500 to $50,000. You have two options for taking advantage of your Upgrade Card line of credit — either making purchases on your card anywhere Visa is accepted (up to your credit line) or having funds transferred to your bank account, for no charge. (Note, you cannot use the Upgrade Card to withdraw cash at an ATM.)

Whichever option you choose, all the purchases or transfers within a statement period will be grouped into an installment plan based on your predefined terms. You’ll have set, equal payments owed each month designed to help you pay off your debt quickly and painlessly.

Unlike a normal, unsecured credit card, the Upgrade Card does not let you carry a balance nor does it accrue interest the longer you remain in debt. Instead, the card charges interest on all purchases at your set rate, and installment payments are predetermined. You must make installment payments each month in full.

During your next statement period, you can continue to make purchases on your Upgrade Card up to the amount available in your credit line. At the end of any new period, purchases are lumped into a new installment plan with your current rate and terms. That means you can have more than one installment plan running at a time, as you continue to make purchases with the Upgrade Card.

To help you keep track of multiple installment payment schedules, the Upgrade Card lumps all your monthly payments together into one amount due. All you have to do is keep track of the payment on your account and continue to meet it each month. As new installment plans are begun or old ones are fully repaid, you’ll see the payment adjust month to month.

Put simply, you can think of your monthly Upgrade Card payment the same way you’d think of a minimum payment on a traditional card. The total amount of all active installment plan payments will be billed to you each month, and you must pay it in full by the due date.

Benefits of the Upgrade Card

Because you make equal installment payments every month with the Upgrade Card, you’ll pay off your balance much faster than a traditional credit card. This is because the minimum payment on a traditional credit card is usually much smaller than those on an installment plan — and carrying a balance on a credit card can keep you in debt for a long time.

In fact, the Upgrade Card estimates you can pay a $10,000 balance more than 20 years sooner and save more than $10,000 in interest by leveraging this kind of payment plan, instead of making minimum payments on a credit card.

A comparison of how much interest you’d pay and how long you’d be in debt, using the Upgrade Card versus a normal credit card, is detailed in the following table:

On top of that, you’ll earn 1.5 percent back on all your purchases. Note: The cash back will be credited as you make your monthly balance payments. After the cash back is posted, it can be used to pay off your Upgrade Card even quicker.

Tips for using the Upgrade Card

The Upgrade Card is a unique product that provides a lot of potential value, but you can make the card work even better for you by following these tips:

• Save it for large purchases: Rather than for day-to-day purchases you can pay off immediately, the Upgrade Card is best for your larger purchases that need financing over an extended period.
• Always make payments on time and in full: Since the Upgrade Card does not allow you to carry a balance, you should have a plan in place to make your payments on time and in full. Paying your bill in full every month will help your payment history (your activity is reported to the credit bureaus) and bring in your 1.5 percent cash back.
• Prepay your balance: If you can free up funds to pay off purchases financed through your Upgrade Card, you can prepay some or all of your balance to reduce the length of your repayment term and get out of debt quicker.
• Monitor your credit score: The Upgrade Card provides users with free access to your VantageScore 3.0 and credit monitoring tools. Keep an eye on your score and any suspicious activity to stay on top of your credit.

Should you get the Upgrade Card?

If you’re struggling to pay back your credit card balance and want a more aggressive repayment strategy, the Upgrade Card could be a great choice for you.

Similarly, cardholders who frequently take advantage of installment payment services to finance large purchases can get a lot of value out of the Upgrade Card. Since the card comes with a competitive interest rate, a credit limit and cash back, you can use it as your go-to payment method for large purchases, like a new couch or dishwasher or PC. That way, you won’t have to apply for multiple financing plans and suffer hard pulls to your credit.