Credit Card EMI

The most prominent advantage of availing a credit card is that the payment for credit cards is the interest charged on the usage of credit cards and the bill can be broken down into smaller installments by the customer. So, if the customer purchases anything that exceeds the amount of R. 10,000, the bill amount that is due can be broken down into equated monthly installments by the customer. With this feature, the entire amount need not be paid and only the selected amount for the tenure has to be paid by the customer.

How does the EMI facility work?

The EMIs on credit cards have a similar functioning as that of the EMI for a normal debt. The customer has to pay a certain amount of debt for a certain period of time.

The EMI, in this case, is calculated depending upon the interest charged by the bank, the tenure that is chosen by the customer and the down payment that is paid by the customer.

One such example is that if any purchase is made for Rs. 20,000 and Rs. 10,000 is paid as the down payment, then the remaining amount can be paid by the customer in installments of rs. 1,200 for the coming year.

The interest rates of some of the topmost credit cards are

How to convert Credit Card Payments to EMIs?

• At the time of purchase, the customer has an option to pay the credit card dues as EMIs. If you think that you do not have the money or have only a part of the money at the time of purchase, then the credit card payments can be converted to EMIs. The amount that can be paid can be used as a downpayment by the customer.
• The retailers encourage customers to use the EMI option while using credit cards. The EMI option is more convenient for the customer while making payments. The interest rate is charged depending upon the bill and the monthly statement of your card.
• For availing of the EMI option from the bank which is offering the credit card, it is essential that the bank should deem that the customer is eligible for the EMI option. A lot of factors such as your credit score, spending habits, monthly bills and repayment schedules are checked before the EMI option is granted.

Advantages of conversion to EMI

• Interest Rates Charged
Different interest rates are charged by different banks for availing the EMI option. The interest rates depend upon the tenure chosen by the customer and also on the down payment that is made. Depending on the tenure, a shorter tenure will attract lower interest rates and a longer tenure will attract higher interest rates.
• Lesser Interest Cost
For the EMI option on credit cards, interest rates are charged based on the reducing balance method. The interest is charged depending upon the balance on the credit card. For instance, if you have purchased something for Rs. 30,000 and paid Rs. 5,000 this month then the interest charged in the next month will be on Rs. 25,000 only. This way, lesser interest is paid every month.
• Repayment Tenures
In the EMI option, the repayment tenures range between 3 months to 2 years. This way some banks charge a higher interest rate for a longer period of time. If the EMI option is available some amount of interest can be saved by the customer by payment using EMI.
• Processing Charges
Some banks do not charge any fees for the conversion of credit card bills to the EMI option. In such cases, it is beneficial to avail of the EMI option. In some cases, during the festival or during the peak times the lenders generally forego the processing fees. Any customer should be making the most of this opportunity.
• Foreclosure or Cancellation
In case you have ample money to foreclose the loan or pay the installments before the planned tenure, then the banks should be informed. Generally, the banks charge a small fee for foreclosing the loan and therefore the loan can be paid off by the customer.

Calculating EMI on Credit Card Bill

• The EMI on a credit card bill can be calculated using the record of interest rate and the processing fee that is decided by the bank.
• The EMI is generally calculated after finding out the remaining amount after the downpayment by the customer
• The remaining amount is then multiplied by the interest rate, tenure and the charges or processing fees that are decided by the bank
• If you want to check the EMI before availing the option you can use the EMI calculator on the official website of the bank and enter the purchase amount, the interest rate and the tenure of the payment.

Check the below points while applying for the EMI option

• Some cards do not have an EMI option
You might be under the impression that all the credit cards have an EMI option that is available to the customer. This is incorrect and you will have to check with the bank if the credit card has an EMI option.
• Credit Limit Reduces
The availability of the EMI option reduces the credit card limit. The purchase of any item, whether opting for EMI or not reduces the spending limit on the card. Thus, The limit reduces the principal spending availability on the card.
• EMI Processing Fee
The EMI processing fee that is levied by the banks on the principal amount of the loan on opting for the EMI option is negotiable. The fee is charged based on the loan amount or a fixed sum for every month by the lender. In such cases, loyalty points can be used and in some cases, the banks can even provide a waiver for this fee.
• Online Payments
In case you are buying products that are available online, you can always prefer to use the online purchase option. This way, the retailer commission can be avoided and the interest rates get lesser than they are if the retailer is involved. Online platforms like Amazon and Myntra have EMI options for purchases.
• Settling the claims in full
Credit card debts are generally very expensive and hence the payments should be made in full so as to avoid any charges or penalties on the same.

FAQS of Credit Card EMI