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Things To Keep In Mind Before Using Credit Card EMIs

BankBazaar.com logo BankBazaar.com 20-09-2018 Team BankBazaar
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While using a Credit Card for a big-ticket purchase, your card company may have pushed you to convert the purchase into smaller EMIs. It may sound like a great option for the customer who cannot afford to pay the entire amount by the due date. However, it is important to note that the EMI option comes with its own set of charges that include processing fee, interest of reducing balance, and penalties for delayed payments.

When you shop with a credit card, you usually get an interest-free period of 45-55 days, depending on the card company you opt for. The interest-free period is counted from the first day of the statement period (or billing cycle). It usually ends on the payment due date. You may plan your purchases during this period.

Also, before you opt for the EMI option, check if your Credit Card has the facility and don’t wait till the time of making the purchase. It would be wise to check and ascertain this while signing up for a credit card, just by reading the terms and conditions of the EMI payments.

Here are a few points for you to consider before you choose the credit card EMI option.

Processing Fee

In case you go for the credit card EMI facility, banks charge a loan processing fee upfront, which varies from bank to bank. Typically it goes up to 1.5 % of the purchase amount. Some banks offer a waiver depending on the brand loyalty and repayment history of the consumer.

  Interest Rates

The interest rates vary from banks to banks and the monthly instalment is calculated on the basis of this. The interest will increase the final price of your purchase. You should be aware that the interest rate will increase with increase in the length of the tenures.

Your Spending Capacity Gets Limited With EMI Purchase

As soon as you opt for EMIs, your credit limit is reduced to the full principal outstanding amount. Let’s understand this with an example. You buy a mobile phone worth Rs. 45,000 with the EMI facility. Suppose your Credit Card limit is Rs. 50,000. With a purchase worth Rs. 45,000, your limit will come down to Rs. 5,000. As and when you repay the amount, your outstanding balance reduces and the credit limit rises progressively.

Opt For Online Purchase

You can also opt for online purchase, as online sellers partner with merchant banks to offer the EMI option to promote online sales. If you are considering credit card EMIs option, do check various online marketplaces to not just ensure a good deal but also get discounts by bypassing the cost of retail commission. You may also grab a better EMI deal ranging from three to 12 months.

Prepayment Of EMIs

Usually, credit card companies do not allow prepayment of EMIs. In case you wish to prepay your Credit card EMI, you may have to shell out an additional amount for pre-paying your outstanding principal amount as part of penalty clause. But not many customers are aware that this is negotiable and penalty can be waived off by the bank.

Settle Your Due Payments In Full

To enjoy the benefits of a credit card, it is absolutely important to make payments for your dues in full and not leave any outstanding balance as it can attract penalties and interest. Late payments may attract an interest rate of 2-3% a month, while it can be as much as 25-40% in a year, which is more expensive than other Personal Loans or Home Loans.

Before you opt for credit card EMI, it would be wise to understand all the associated costs and terms and conditions.

BankBazaar.com is a leading online marketplace in India that helps consumers compare and apply for credit card, personal loan, home loan, car loan, and insurance.

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