Santa Claus comes around just once a year. In the meantime, there are Credit Cards.
  • Credit Card EMI

    One of the major advantages which credit cards offer is that you can purchase any product which is above the price of Rs.10,000 and convert it into Equated Monthly Installments. With this feature, you do not have to pay the entire amount at once, you can pay a portion of it for a selected tenure.

    How Does EMI on Credit Card Work?

    EMI on credit cards works in a simple way. If you are purchasing a product which is more than Rs.10,000, for example, an electronic appliance, furniture, vehicles, etc. You can convert it to an EMI.

    The EMI will be calculated depending on the rate of interest charged by the bank, the tenure you choose and the down payment which you provide.

    If for example, you have purchased a phone worth Rs.20,000 and pay Rs.10,000 as a down payment. The rest Rs.10,000 can be paid as EMIs for a period of 1 year with an interest of 12%. The EMI you will need to pay for 12 months will be Rs.1,200.

    How to Convert Credit Card Payments into EMIs?

    You can choose to convert your credit card payments into EMIs during the time of purchase itself. If you think that you do not have the money or have only a part of the total amount with you at the time of purchase, you can pay that amount as a down payment. The rest can be converted into an EMI.

    Most retailers encourage customers who have a credit card to go for the EMI option as it proves as more convenient for the customer. Apart from this, the monthly EMI is charged to your card as a part of your bill statement per month.

    However, to opt for an EMI option, banks must deem you as eligible for the EMI. It is considered as a loan from the bank. The bank is giving you Rs.10,000 and you are paying the bank on a monthly basis. Banks conduct a check before a purchase can be converted into EMIs. Your credit score, your current loans and your repayment habits of previous loans are checked and then you are cleared for the EMI mode of payment.

    Interest Rates by Top Banks

    Bank Interest Rate Tenure Range
    HDFC Bank 1.5% per month 9 months to 3 years
    State Bank of India 14% 3 months to 2 years
    Axis Bank 1.5% per month 6 months to 2 years

    Advantages of Converting Credit Card Purchases in EMIs

    Here are some of the advantages of converting your purchases made on your credit card into EMIs.

    • Interest Rate – Different banks charge a different rate of interest on your EMI. The interest rate will also depend on the tenure you have chosen to pay off the amount in its entirety. While shorter tenure ranges attract lesser interest rates, the higher tenures call for comparatively higher interest rates.
    • Reducing Interest Rate – In most cases, banks charge interest based on the reducing balance method. The interest rate will be charged on the balance of the loan at the end of every month. If you have purchased a product of Rs.30,000 and paid Rs.5,000 in the first month, the interest is usually charged on Rs.25,000. In this way, the interest you pay is lesser every month.
    • Repayment Period – The tenure which you choose can range between 6 months and 2 years usually. Some banks also provide a tenure of 3 months as well. You can save yourself some money on higher interest rates by choosing the EMI facility.
    • Processing fee – Some banks do not charge a processing fee to convert your purchase into an EMI. In that way, you can save money as well. There are selected offer periods when the bank forgoes their processing fee, during the festival time for example. You can make the most of your credit card by making your purchase in that time period.
    • Foreclosure and Cancellation – Banks offer the facility of foreclosing or cancelling the loan if you have acquired the money to pay off the loan before your tenure has ended. You can do so by paying a certain amount of money as a foreclosure fee which is charged. If you are a long-time customer; the bank may not charge you the foreclosure fee.

    How to Calculate EMI on Credit Card Bill

    You can calculate the EMI on your credit card bill with a record of the interest rate and processing fee which is decided by your bank.

    The EMI will be calculated based on the remainder of the total purchase amount multiplied by the interest rate and tenure, and processing charges.

    If you wish to check the EMI which you need to pay, you can refer to the EMI Calculator on the website to get an accurate figure depending on your purchase amount, interest and processing fee.

    Things to Keep in Mind While Opting for an EMI on Credit Cards

    • Not every credit card has the facility of EMI

      The first step before converting your purchase to an EMI is to check whether your credit card offers the facility. There have been cases when credit card owners realize that their card does or does not offer the facility at the time of making a purchase.

    • EMI purchase reduces your card Limit

      If you have purchased a product worth Rs.30,000 with the EMI facility. Your spending capacity is affected by every purchase you make, EMI or not. As soon as you opt for the EMI facility, your credit limit is cut down by the principal amount, which is Rs.30,000. Hence, if you have a credit limit of Rs.50,000, a purchase of Rs.30,000 brings your limit down to Rs.20,000. Your credit limit will increase when you keep paying the EMIs on time.

    • EMI processing fee is negotiable

      When you opt for the EMI option, banks usually charge a processing fee on your principal amount. The fee can range from a small percentage of your loan amount to a fixed sum depending on your card and the purchase amount. You can negotiate with their bank and even get a waiver provided based on their brand loyalty and if you have a good repayment history.

    • Opt for online purchase

      Online sellers such as Amazon, Flipkart, etc. have tied up with merchant banks to offer the EMI option to promote their sales. You can not only get a deal but also discounts by bypassing the cost of retail commission. You can also get a better EMI deal ranging from 3 to 24 months.

    • You can get a waiver on the prepayment penalty

      Credit card EMI schemes usually have a prepayment penalty clause where you get charged a certain percentage of the amount for pre-paying on your outstanding principal amount.

    • Settle your payments in full

      Credit card debt can get very expensive. Hence it is important to make your due payments in full and not leave outstanding balances which will earn you penalties and higher rates of interest.

    FAQs on Credit Card EMI

    1. Why should I convert credit card purchases into EMI?

      There are many reasons to do this, a few being no processing fee and reduced interest rate.

    2. On what basis will my EMI on a credit card be calculated?

      Your EMI will be determined based on the remainder of your total amount of purchase multiplied by the rate of interest, tenure, and also the processing charges.

    3. In case I have opted for an EMI on the FinBooster: YES Bank – BankBazaar Co-branded Credit Card, how will the minimum amount be calculated?

      The Minimum Amount Due for FinBooster: YES Bank – BankBazaar Co-branded Credit Card will be the Annual Fee + EMI Amounts + GST + Rs.200 or a minimum of 5% of the total amount due (whichever is lower).

    4. Do all credit cards have the EMI facility?

      No, not all credit cards come with the facility of EMI.

    5. What is the interest rate for HDFC credit cards EMI?

      The rate of interest for EMI on HDFC credit cards is 1.5% per month (9 months to 3 years).

    6. Is the EMI option cheaper than the regular credit card payments?

      No, you must keep in mind that the regular credit card payment is ideally the best. Credit card EMI conversions will charge interest.

    7. Will the bank levy any processing fee on credit card EMI conversions?

      Not all banks will levy a processing fee. There is a no-cost EMI option that does not charge any processing fee.

    8. Will I be allowed to pay off my EMIs on my credit card in one go?

      If you wish to clear the outstanding EMIs, you must place a request for pre-close of the EMI. In this case, you may be charged a pre-closure fee. This is 3% of your outstanding principal amount.

    9. What happens if I pay more than my EMI amount?

      If you pay more than your EMI amount, the surplus amount will be on your credit card statement and will be adjusted against your outstanding amount for the next month.

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