What is a Credit Card EMI and How Does It Work?
Credit card EMIs, or Equated Monthly Installments, are quite a popular mode of payment these days, especially for those who want to make a high-end and expensive purchase. By opting for payment through EMIs, one can pay for any purchase in smaller instalments over a specific tenure rather than a one-time upfront payment.
How to Avail the Credit Card EMI?
When making a purchase and after purchasing, the buyer can choose the EMI facility. If they don't have enough funds to pay the full amount upfront, they can make a partial payment, which will be considered a down payment. The remaining balance can be converted into an EMI, which will be charged to their credit card every month for a specific duration. However, eligibility for this facility is required as it is considered a loan taken from the bank.
Eligibility Criteria
The credit card EMI facility is convenient and helpful to consumers while making big purchases. However, before converting the amount into EMIs, banks look into credit scores, repayment track records, and current loans. The terms and conditions for this facility can vary between banks. The Federal Bank credit card holder can convert unbilled retail purchases in the range of Rs.2,500 to Rs.7,50,000 into an EMI, based on terms and conditions.
The Benefits of Converting Purchases on Credit Cards into EMIs
Converting credit card purchases into EMIs has various benefits:
1. Flexible Repayment Tenure
One can choose the repayment tenure from 3,6,9,12, 24 months. The flexibility ensures that consumers do not default on their payments.
2. Interest Rate based on tenure
The repayment tenure chosen impacts the interest rate, i.e., a lesser interest rate will be charged for a short tenure and vice versa. Sometimes, a few banks might not levy any interest on this facility or even offer a ‘reducing interest rate’ where the interest rate is charged only on the balance due every month and not the entire amount.
3. Processing Fee
During certain special events like festivals, some banks might waive the processing fee for this facility. This is the best time to make all the important purchases using the credit card EMI facility.
4. Improving the credit profile
This facility is a great way for consumers to improve their credit profile, which will be beneficial in any future purchases.
Things to Remember
- Consider the EMIs while planning expenses.
- Some banks may allow prepayment of the EMI amount without any penalty.
- Late payment of EMI amount can attract late payment charges and affect the credit score.
- Be aware of any hidden charges associated with the EMI facility.
- Bank reserves its absolute right and discretion to approve or decline any request for EMI.
- Transactions under certain merchant categories especially gold, jewellery, ATM transactions, cash transfer, fuel, etc. as well as transactions which are expressly prohibited under the law/regulations for conversion into EMI, cannot be converted into EMI.
Credit card EMI is a great way for individuals to plan and make important and big purchases without burning their finances. It helps in financial planning and paying dues on time. However, before opting for the facility, consumers are advised to read through and understand the bank’s terms and conditions. In short, even though credit card EMIs are a practical tool, one must be fully aware of all the financial commitments involved.