Knowing how credit card EMI works can help you simplify your repayment process. With this feature, you can convert large expenses into monthly instalments, making it a comfortable option.
However, it is vital to understand the functioning of EMIs to avoid debt. By converting your credit card bills into EMIs, you can make timely payments and maintain a positive credit history.
How Credit Card EMI Works
While making a purchase, you have the option to pay your credit card bill as an EMI. The credit card payments can be converted to EMIs if you don’t have the required funds. The initial amount you pay is the down payment, which is sometimes required.
The issuer usually checks your credit score, spending habits, repayment history and more. If you are eligibile, the issuer will allow the EMI payment option.
After the down payment, EMI is calculated on the basis of tenure and the remaining amount. To calculate the EMI, the issuer adds the interest rate and processing fee to the total. You can use an EMI calculator on your credit card company’s app or website to check the calculation and plan repayment.
Other Factors to Consider
While the EMI option can be a great solution during an emergency, considering the following factors will help you make a more informed decision:
Processing Fee: While converting the outstanding balance into EMIs, the issuer charges a processing fee. In cases, the issuer waives this fee. Check it to ensure it doesn’t add too much to the cost of your purchase.
Online Payments: Most credit card EMI facilities allow you to pay online, which is convenient. Check if your card has a mobile app, so you can stay informed about pending and paid EMIs. This helps ensure you do not miss EMIs.
Repercussions of Default: Upon defaulting on an EMI payment, you will incur additional interest charges and other fees, like late payment charges. Accumulating balance in this case can adversely affect your credit score.
Reduction in Credit Limit: Choosing the EMI option can impact your card’s available credit limit. Make sure you understand its impact on subsequent purchasing ability before you go ahead.
Benefits of Converting Credit Card Payments into EMIs
Credit card issuers offer the feature of EMIs to help you convert big payments into small instalments. EMIs come in handy to help you pay bills more comfortably. You can also utilise this feature when you are facing a cash crunch.
For example, if you have a medical emergency and need to pay a large bill, you don’t have to settle the entire amount upfront. Instead, you can opt for EMI payments.
Opting for EMIs on a credit card has the following benefits:
Longer Tenure: You can choose to pay according to your convenience. Most issuers offer a provision to pay between 3 months to 2 years. The thing to keep in mind is that a shorter tenure has lower interest rates compared to a longer tenure.
However, if you are going to be short on funds for a few months, a long tenure will be better. It may increase the total interest, but it gives flexibility to repay the amount at your pace.
Reducing Interest: The interest is dependent on the following factors:
- The tenure chosen
- The down payment made
The best part is that you only need to pay interest on the remaining balance when you choose credit card EMIs. For example, if you have purchased something for ₹20,000 and paid ₹5,000 this month then the interest charged next month will be on ₹15,000 only. This way, lesser interest will need to be paid every month.
Special Offers: Usually, there’s a processing fee levied for converting credit card payments to EMIs. Some issuers may forego the processing fee in general or as a special offer during the festival season. You should take advantage of this offer as it can make a difference in the total repayment amount.
Flexibility to Foreclose: You can choose to foreclose in case of availability of funds. The issuer may charge a small amount to allow foreclosure, but this helps you avoid any more interest.
You can opt for the EMI option after weighing its pros and cons. However, not all credit cards offer this feature, so it’s essential to check with your credit card issuer to see if the EMI facility is available.
If you are looking for an instant credit card online to convert your large expenses into EMIs, the One Credit Card can be a great choice. It has zero annual and joining fees, and it allows you to convert bills into EMIs right on its powerful mobile app.
Apart from that, you can earn up to 5X reward points on your top two spending categories each month. You can also make the most of the One Credit Card App to control all aspects of your usage. In addition, you can save more with a wide range of discounts on shopping, dining, upskilling, rental payments and more. Apply online to enjoy the benefits of this lifetime-free credit card!
