E-commerce
Instalment payments: costs and duties
Instalments carry an APR, not a monthly figure: 1,200 euro in 12 payments of 105 costs 9.49% a year, and 24 euro of upfront fees push the APR to 13.73%.
Key points
- 1,200 euro in 12 payments of 105 equals an APR of 9.49%; with 24 euro of upfront fees it rises to 13.73%.
- 1,200 euro in 24 payments of 55 with 24 euro of fees costs 11.96% a year, less than the shorter 12-payment plan only because the fees spread over more months.
- Directive 2008/48/EC, Article 2(2)(c) and (f), excludes credit below 200 euro, credit free of interest and charges, and credit repayable within three months with insignificant charges.
- Directive (EU) 2023/2225 applies from 20 November 2026 and explicitly includes buy now pay later.
Instalments carry an APR, not a monthly figure: 1,200 euro in 12 payments of 105 costs 9.49% a year, and the same offer with 24 euro of upfront fees rises to 13.73%. The customer sees the instalment, the law asks for the rate, and the shop has to know which of the two numbers it is promising.
Why the instalment says nothing
An instalment is an amount, the cost of credit is a rate. The same "12 payments of 105" can hide an APR of 9.49% or 20%, depending on what the customer actually receives: if fees are deducted upfront, the financed capital is lower and the effective rate higher. That is why the APR is the only comparable number, and the only one a customer can use to compare two offers from two different shops.
| Plan on 1,200 euro | Payments | Upfront fees | APR |
|---|---|---|---|
| 3 payments | 3 × 400.00 euro | 0 euro | 0.00% |
| 12 payments, no fees | 12 × 105.00 euro | 0 euro | 9.49% |
| 12 payments, with fees | 12 × 105.00 euro | 24 euro | 13.73% |
| 24 payments, with fees | 24 × 55.00 euro | 24 euro | 11.96% |
The table shows a result that surprises people: the 24-payment plan costs less than the 12-payment plan with the same fees, because the 24 euro spread over a longer period. It is not an arithmetic mistake: it is the reason the APR has to be computed rather than estimated by eye from the sum of instalments.
When the offer is consumer credit
Consumer credit is governed by the Italian banking code (Legislative Decree 385/1993, Articles 121-126), which transposes Directive 2008/48/EC of 23 April 2008. Article 2(2)(c) and (f) of that directive excludes three cases that matter in ecommerce: credit below 200 euro, credit granted free of interest and without other charges, and credit repayable within three months with insignificant charges. A "pay in 3" at zero interest spread over six weeks sits outside scope; a 12-month plan with an arrangement fee does not, and must be handled as consumer credit, with pre-contractual information and a creditworthiness assessment (Article 124-bis of the banking code).
What the customer must see before paying
The cost for the shop
The shop pays the lender a commission, usually between 2% and 6% of the financed amount, and in return gets paid at once and hands over the credit risk. Two effects need measuring: the conversion lift on carts above 300 euro, and the rise in returns, because people buying in instalments send things back more often. If margin per order is 22 euro and the commission on 600 euro is 4%, which is 24 euro, the instalment order starts at a loss and only customer lifetime value recovers it.
From 20 November 2026 the scope changes
Directive (EU) 2023/2225 of 18 October 2023 replaces Directive 2008/48/EC and applies from 20 November 2026, with national transposition due by 20 November 2025. It raises the covered credit ceiling to 100,000 euro and explicitly includes buy now pay later, and it requires a proportionate creditworthiness assessment plus standardised European information. If your checkout offers instalments, the agreement and the notice have to be re-read against that text, not the 2008 one.
node -e "const taeg=(n,rate,fee,mesi)=>{const net=n-fee,f=i=>{let p=-net;for(let k=1;k0?lo=m:hi=m}return((Math.pow(1+(lo+hi)/2,12)-1)*100).toFixed(2)};console.log('12x105 senza spese',taeg(1200,1260,0,12)+'%');console.log('12x105 con 24 euro',taeg(1200,1260,24,12)+'%');console.log('24x55 con 24 euro',taeg(1200,1320,24,24)+'%')"The limitation
The calculation assumes constant monthly payments, fees withheld at disbursement and no ancillary cost: insurance, stamp duty on the agreement, collection fees. In practice the APR that binds is the one the lender writes into the agreement, and my script is there to check whether that number is plausible, not to replace it. And no APR says whether the customer comes back: that is measured by repurchase at twelve months.
Where to start
Frequently asked questions
Is the APR mandatory on instalment payments?
Yes, when the offer falls under consumer credit: the APR and total amount payable must appear before the agreement is concluded, as Directive 2008/48/EC requires, transposed into the Italian banking code. A plan with no interest and no charges is outside scope, but it still has to be described clearly.
Is "pay in 3" consumer credit?
Usually not: Article 2(2)(f) of Directive 2008/48/EC excludes credit granted free of interest and without other charges, and credit repayable within three months with insignificant charges. Add an arrangement fee or stretch the plan past three months and you are in scope, with information duties and a creditworthiness assessment.
Who loses if the customer stops paying?
The lender, when the credit has been assigned: the shop is paid at once and does not handle the default. In models where the shop stays exposed, the risk is yours and belongs in the margin. Always ask the lender whether the agreement includes recourse.
Do instalments increase returns?
Often yes, because they lower the perceived price and push purchases to higher amounts, where a return costs more. Measure it per price band rather than overall: below 150 euro carts there may be no difference at all.
What changes with Directive 2023/2225?
From 20 November 2026 the consumer credit ceiling rises to 100,000 euro and buy now pay later is explicitly covered, with standardised European information and a proportionate creditworthiness assessment. Contract terms and notices must be re-read against that text.