Credit card EMI is one of the best options to manage your purchases without emptying your bank balance. As the name suggests, this facility allows you to convert your purchases into affordable EMIs with a comfortable tenure plan. It lets you easily make big-ticket purchases without straining your budget.
However, this option has many pre-requisites, which you must consider for swift and hassle-free payment. To help you better understand credit card EMI, here’s an overview of how it works and things to consider before opting for it.
How do Credit Cards EMI Work
You can also consider this facility as a loan on a credit card. This is because it is similar to other types of loans, such as personal, home, or car loans. The amount you will pay in EMIs is the borrowed amount. The issuer may charge a fixed rate of interest on this amount.
You can choose your preferred repayment tenure from the range given by the issuer. Once your request is processed, continue paying monthly installments to avoid any late penalties or additional fees.
Things to Consider Before Converting to EMIs
Here are a few things you should consider when converting credit card purchases into EMIs.
Interest Rates
This is the most crucial information about your loan on a credit card, which you need to verify before opting for it. This is because it affects your repayment amount and the affordability of your EMI.
If the interest rate is too high, the EMI amount will also rise, affecting your budget. However, if your issuer gives you a no-cost or low-cost EMI, then this option can be beneficial.
Reducing Balance
Before availing of this option, you should check if your issuer charges interest on the EMI amount using the reducing balance method. Here, the interest will depend on the outstanding amount.
So, let’s say you have an EMI plan for a total purchase of ₹30,000, but if you have paid ₹10,000,. Then, interest will be calculated on the remaining ₹20,000. This is more cost-effective as the overall interest will be low.
Processing Fee
This is a nominal fee that the issuer will levy for processing your request. It can be a fixed amount or a percentage of your borrowed amount. Since it will add to your borrowing cost, you must check and confirm this beforehand to ensure that it is a feasible option.
Tenure
You can choose from a range of tenure options to decide on a comfortable EMI amount. However, it is crucial to understand that a shorter tenure will increase your EMI amount but decrease your overall cost of borrowing. On the other hand, a longer tenure will attract a higher interest rate but have a lower EMI amount. You can compare and choose one based on your budget.
Foreclosure Fee
If you have funds available, you can close your EMI plan before the tenure ends. This will help you save on interest and be debt-free. However, some issuers may charge a fee for this, which can nullify your savings. So, you must check this before you make a decision.
Credit Limit
You can only opt for this facility if you have a credit limit available to make the complete purchase. If you have exhausted your credit limit, pay your bills before making the purchase.
How to Convert Your Purchase into EMI
A loan on a credit card is an opt-in facility that you can avail of by requesting your issuer. There are two ways you can convert your purchase into EMI.
Option 1: At the Time of Payment
In this case, you need to opt for credit card EMI at the time of payment for a big-ticket item, such as a laptop, high-end smartphone, or TV. Once you complete the formalities and choose a comfortable tenure, the purchase amount will be blocked on your card.
The limit will be restored as and when you pay the amount. The installment will be added to your credit card bill along with any other transactions made through the card.
Option 2: At the Time of Bill Payment
You can choose this option during instances when you cannot pay the credit card bill in full. This facility is offered by most issuers and allows you to avoid the hefty interest charges associated with delayed credit card bill payments.
It works similarly to the other option, and once converted, you will have to pay EMI for the decided tenure. You can place a request for this through the credit card app or the official website.
It is important to know that this facility may not be available with all issuers or cards. So, you must carefully choose your issuer and card. One option to consider is the One Credit Card. With this card, you can track, manage, and convert your spends directly on the mobile application. You can easily opt for the EMI option for transaction amounts over ₹2,500 and repay over a comfortable tenure.
Moreover, you can get 5X reward points on your top two spending categories. The points come with no expiration and can be redeemed without any charges. You also don’t have to pay any joining or annual fees, making it a financially smart option. Apply online to enjoy this lifetime free credit card for maximum savings.