​How Does EMI Facility on Credit Card Work?

Credit cards not just offer credit to you as a user but even offer them with the freedom to repay in the form of instalments conveniently. Lately, credit card has come across to be one of the crucial financial options for users. Whether it’s to make a big-ticket transaction or to make a payment during exigencies, best credit cards come across as a rescue for users. For example, if you purchase a good worth Rs 1 lakh through a credit card while you earn a monthly income of Rs 60,000, you do not require worrying about paying the whole amount in the upcoming months. You simply can divide the repayment proceed of Rs 1 lakh into personal loan EMIs and repay the same according to your convenience. This means you can pay in five instalments of Rs 20,000 each here in this scenario. This would make your life simpler as it would not impact your monthly finances and would even be able to purchase something that’s over your budget. 

Mentioned here are some points that can assist you understand better how credit card EMI functions – 

No matter whether it is the best credit card in Indiaor a regular credit card of distinct variants i.e., fuel credit card, lifestyle credit card, departmental credit card, etc., the credit card EMI works the same way for all cards. 

·       EMI is computed on distinct parameters like the interest rate levied by the bank, the time frame selected for repaying your amount, etc. 

·       Monthly EMI is levied and added to the monthly credit card statement.

To know the monthly EMI amount that you must pay along with the credit card outstanding bill, you can use an online credit card calculator. 

How can you convert the credit card due into EMI?

You have the choice to go for the repayment of credit card outstanding into EMIs after the purchase of the good. If you hold a specific amount when purchasing, you can select to make a down payment while the rest of the amount can get converted into an EMI form. 

Well, it is crucial for you to remember that the choice to repay the credit in EMIs is not completely in the credit card user’s hands. The main determining factor of whether a user qualifies for converting the credit card dues into EMIs depends on the bank or credit card issuer.  

Also Check: Best Credit Card in India

Credit card outstanding is looked upon as a loan from a bank. The financial institution provides you with a credit card bill monthly and you get complete flexibility to pay in parts. So, before the bank lends you the amount, it’s crucial for the bank to make sure you repay the amount by its due date and not take any undue benefit from the loan. 

For this, the bank reviews your score, credit past record and present loans, etc. before deeming you a qualified applicant for converting your card repayments into EMI. 

What are the parameters you must factor in to convert your card dues into EMI?

Mentioned here are some of the crucial parameters that you must consider before you convert your credit card dues into EMIs – 

Rate of interest 

You must note that bank levy interest on credit card dues that are converted into EMI. Credit card rate of interest, however, differs from one bank to another. It depends on distinct parameters like repayment tenure, down payment amount, and others. The shorter the repayment tenure, the lesser the interest rate and vice versa. Thus, it is better to make repayment of the loan proceeds as early as possible. 

Reducing balance method 

Issuers mostly levy interest on the EMI proceeds in the form of a reducing balance method. It means the interest would be levied on the rest of the loan balance by the end of each month. So, for example, if you hold a loan equaling Rs 50,000 and you paid Rs 10,000 in the first month, interest constituent in the upcoming months would be levied on the rest of the amount equaling Rs 40,000. Here, in this case, the interest constituent that you must pay lowers every month. 

Repayment loan tenure 

You can select a repayment loan tenure ranging anywhere from six months and two years. However, it’s crucial to remember that the shorter the loan tenure, the lesser interest constituent would be required to be paid. 

Processing charge 

A few banks levy a minimal processing charge on converting credit proceeds into EMI whereas others do not need for paying a charge. Generally, it is during festivity, when banks waive the processing charge, and you can make the purchases as usual. 

Cancellation and foreclosure

In the case you manage to accumulate the pending loan proceeds, then you can repay the same before your repayment tenure comes to an end. This may infer cancellation or foreclosure of the loan. But in such scenarios, various lenders might levy a minimal prepayment or foreclosure charge while others might not. 

Crucial points to factor in while converting the credit card dues into EMI – 

·    Not every card provided comes with the facility of converting credit card dues into EMIs. For those the ones who offer, not every credit card user would qualify for converting the card dues into EMIs. 

·       Making EMI transactions on cards lowers your credit limits. The moment you opt for the facility for EMI, your spending limit may straightaway be reduced by the purchase amount.

·       When you make an EMI transaction, it is better you go for the purchase online route. This is because online merchants tend to tie up with distinct merchants to enhance their sales due to which they not just provide exciting deals but even provide distinct discounts by bypassing the cost of their commission. 

·       If possible, you must try and prepay your outstanding loans because this would assist you in getting rid of a high-interest constituent that you might require paying otherwise. Also, it’s crucial to remember that not all issuers charge a cancellation or foreclosure charge, so you may consider opting for the prepayment option.

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