Are you wondering about how a credit card EMI works? Credit cards offer a feature that allows you to pay a significant sum in smaller monthly instalments. You can maximise this perk while paying for a large purchase, managing cash flow, and long-term payments.
Opting for an EMI facility can save you from:
- Defaulting on credit card payments
- Save your credit score from going down
- Manage your big purchase by breaking it down into smaller payment options
However, understanding how an EMI scheme works is vital to make the most out of it.
What is the EMI Facility for Credit Cards?
A credit card EMI is a facility that enables you to split the total amount of a high-value purchase into fixed monthly payments over a specified period, typically ranging from 3 months to 2 years. This option is useful for managing expenses without the need to pay the full amount upfront, making it easier to budget for larger purchases.
A credit card EMI stands as a viable and wise financial option for those who can’t pay their credit card bills in one go. The complete amount is converted into smaller and more affordable instalments across a chosen tenure as monthly instalments. The conversion of the amount is subjected to some charges like:
- Rate of interest
- Processing fee
You can choose a suitable tenure based on your financial needs or the card issuer’s plan. It can be 3 months, 6 months, or even 2 years. You can understand this better by considering the following hypothetical example.
For example, say you buy a laptop for ₹80,000 by giving a down payment of ₹30,000. Note the chosen tenure as 12 months. You can pay the remaining charges of ₹50,000 over a period of 1 year. The EMI you pay will be converted into 12 EMIs with an interest rate of 12%. Now, you have to pay ₹6,000 each month for a year.
How Does a Credit Card EMI Work
Credit card issuers provide the EMI options, but you need to meet the required eligibility criteria. The eligibility check depends on factors like:
- Your existing debt
- Your repayment habit on the basis of previous loan
- Your credit score
Though EMIs can help you manage your existing needs without overburdening your finances, it is important to have clarity on which option you’re opting for. There are two types of EMI options: low-interest EMI and zero-interest EMI.
Credit card companies charge heavily on late payments and defaulting payments. The low-interest EMI may be between 1.25% to 1.99% per month, depending on the card providers. Remember, these charges are in addition to the processing fee. It is a viable and wise option compared to the high interest rates.
Some credit card providers have zero-interest EMI options, including the processing fee. This helps you save on purchases, as there are no interest charges levied. So, you have to pay only the total purchase value as EMIs.
Advantages of the EMI Facility
The credit card EMI option can prove to be a highly valuable and affordable option with these benefits:
- EMIs make it easier to manage finances by spreading out the cost of larger purchases over time
- EMIs typically have lower interest rates compared to regular credit card spending, making them a more economical option for financing purchases
- You can choose the repayment period that best fits your financial situation, allowing for better financial planning
Factors to Consider
Before opting for the EMI option, you should keep some factors in mind:
- Some banks allow you to pay off your EMIs early without penalties, which can help save on interest costs
- Some credit card providers don’t charge a processing fee for converting large bill payments to EMIs
- If they also charge, issuers may forgo it during special occasions, so look for credit card offers with this advantage
- Not all credit cards offer the EMI facility, and eligibility may depend on your credit score and repayment history
- Many online retailers offer special deals or no-cost EMI options, making it beneficial to shop online if you plan to use this facility
- You should pay your EMIs on time, as defaulting on them can impact your credit score negatively
You can maximise the benefits of the EMI feature of your credit card when you use it responsibly and safely. The One Credit Card is an excellent choice that you can consider for the EMI facility. You can convert all your purchases exceeding ₹2,500 to affordable EMI at nominal interest rates of 1.33% per month. In addition, you can earn up to 5X rewards on the top two spending categories each month and pay zero fees to redeem your points.
The One Credit Card mobile application comes with an EMI Calculator, which you can calculate by inputting different amounts and tenures. The One Credit Card is also a lifetime-free card, so there aren’t any joining fees, annual fees, or hidden charges. Apply now and opt for the EMI facility seamlessly.