How does Credit Card EMI work?

3 min read

Credit Card EMIs can be useful and convenient, but there are these scenarios in which to use them.

  1. EMIs on Credit Card comes in handy when you want to buy something while your bank balance doesn’t support like a high-end laptop, smartphone or something that you have had your eye on. You do not have to think too much, thanks to the Credit Card EMIs.
  2. If you have overspent on your credit card during big offers festive season splurge and you are in debt, with high-interest rates as high as. Taking the EMI option on your credit card balance will bring your rate of interest down to 17-18% per annum, i.e. a reduction by half. This is in addition to the benefit of not having to submit a separate application or produce a set of documents.

Things to know before opting for Credit Card EMI!

1. Processing Fee

EMI schemes are subject to a certain processing fee, usually to the range of a small percentage per ₹1000 of the amount you wish to convert into EMIs. Zero EMI offers are a notable exception.

2. Available Credit

Make sure you have enough credit in your card – ideally more than or equal to the amount you want to convert into EMIs, otherwise your EMI request will be rejected.

3. Temporary Reduction of Credit Limit

The moment your EMI is in action, your bank will temporarily block an amount equal to the value of the purchase you made through the EMI option. Your bank will start increasing your credit limit by the amount equal to your monthly EMI as you start paying back.

Sometimes, banks also offer a Personal loan on the card based on your eligibility. This is a better option to clear your card balance as it doesn’t affect your spending capacity.

If you are on the verge of defaulting on the card payment, the EMI option will help keep the payments to manageable levels and save your CIBIL score from going down. However, you should use the EMI repayments option sparingly as it can be a burden for a prolonged period of time.

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