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.
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.
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.
|Bank||Interest Rate||Tenure Range|
|ICICI Bank||12.99% onwards||3 months to 2 years|
|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|
Here are some of the advantages of converting your purchases made on your credit card into EMIs.
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.
Other Credit Card 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.
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.
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.
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.
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.
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.
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.
ICICI Bank charges the highest interest rate at 12.99% (3 months to 2 years) onwards and Axis Bank has the lowest at 1.5% per month (6 months to 2 years).
There are many reasons to do this, a few being no processing fee and reduced interest rate.
No, not all credit cards come with the facility of EMI.
The rate of interest for EMI on HDFC credit cards is 1.5% per month (9 months to 3 years).
No, you must keep in mind that the regular credit card payment is ideally the best. Credit card EMI conversions will charge interest.
Not all banks will levy a processing fee. There is a no-cost EMI option that does not charge any processing fee.
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.
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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