How Does Credit Card EMI Works

How Does Credit Card EMI Works

This is the season when all retailers offer amazing sales and discount deals, especially your favorite online shopping site. Having a Credit Card can double your benefits in the form of additional discounts and cashback offers.

Sometimes, it so happens that a certain product, such as a mobile phone that you wish to buy is way out of your budget. But, having a credit card can steer you out of that problem too! These days many e-shopping sites give you the option of buying your favorite products with an easy EMI scheme. You can go for this option if you do not have ready cash and can’t afford to make a big fat payment. Here, you have to opt for a suitable tenure for yourself which can generally go up to 24 months. The bank charges interest on the borrowed amount but some banks also offer No Cost EMI for a shorter tenure.

Credit Card EMI Calculator

Credit card EMI calculator helps you calculate your EMI and view the monthly repayment schedule. The monthly payment amount is added to the interest and service tax. Depending on the bank, the interest rate will vary. You can choose to make the payment in 6, 9, 12, 18, and 24 installments. There are many credit card EMI calculators available online which instantly check whether you can convert your credit card repayments into EMIs, and see what the total credit card EMI interest rate charges would be.

How Does Credit Card EMI Work?

People use credit cards for the purpose of enjoying deferred payments. These payments also enjoy an interest-free period of 40-45 days which constitutes your billing cycle plus grace period. But sometimes, it may not be possible to pay back within the interest holiday period, especially for a large purchase, such as a refrigerator or a high-end television. This is where the credit card EMI schemes come into play. You cannot opt for EMI without credit card. Consider the following steps to know how credit card EMI works.

  • EMI schemes are issued by credit card companies that have special tie-ups with the e-merchant.
  • Once you opt for the EMI scheme, the bank pays to the vendor the full amount of your purchase on your behalf.
  • Then, you can repay your bank in easy installments over 3 months, 6 months, 9 months, 12 months or 24 months – depending on your choice.
  • Banks charge an interest rate in the range of 11%-15% for providing this service, which increases the final price of the purchase for you.
  • Banks also charge a processing fee, which is usually 0.5%-1% of the amount of your purchase.
  • If in the future, you have enough surplus cash and wish to close the Credit Card EMI loan, you will be charged prepayment penalty of 2%-3% of the outstanding balance.

Some Tips To Consider:

  • Choose a lower tenure within which you can conveniently repay the amount. Higher tenure would mean more cash outflow as interest.
  • Be watchful of EMI options that have zero processing fees, especially during festive seasons.
  • Read all terms and conditions, especially related to pre-closure, and interest rates before choosing the scheme.
  • Don’t default on payments because it will negatively impact your credit score.

Although the credit card EMI option helps you own the things you wish to have in a convenient and pocket-friendly manner, the truth is you eventually end up paying more with the added interest payments. Simply put, if you can afford to make a lump sum payment, then paying for it in cash is the best option. But if you are tight on your budget, and have a lot of bill payments to take care of, then a credit card will rescue you and help you buy what you want.


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