5 factors to consider before choosing a credit card EMI

Customers may convert large purchases made with their cards into EMIs with several credit card providers. However, there are a number of things and considerations you may take into account before choosing a credit card EMI. Let us decode them one by one.

Kirti Jha, MintGenie Team
First Published18 Sep 2022, 11:00 AM IST
Customers may convert large purchases made with their cards into EMIs with several credit card providers. 
Customers may convert large purchases made with their cards into EMIs with several credit card providers. ;(Pixabay)

Many credit card issuers allow customers to turn big purchases made with their cards into recurring monthly payments known as EMIs (Equated Monthly Instalments). When making purchases from some merchants, credit card customers have the option to convert their purchases immediately into EMIs or to combine many payments into a single EMI.

Undoubtedly, turning your large purchases into EMIs can ease your immediate stress, but EMIs can be a significant burden for your financial security if they are not paid on time. The down payment you contribute, the duration you select, and the interest rate the bank charges will all be taken into account when calculating the EMI.

Speaking of that, there are various factors and points you may consider before opting for a credit card EMI. Let us decode them one by one.

Repayment tenure

The payback period for purchases is completely up to the discretion of the customer. The normal payback period may be 3 months, 6 months, 9 months, or 12 months long. Credit card companies typically provide a reduced interest rate for a longer term.

However, you must first determine how much interest you will end up paying over the course of the prolonged tenure before choosing it. You must make an informed choice about the duration because saving money is not always guaranteed by a longer tenure with a lower interest rate.

Penalties on missed EMIs

If you chose to convert your EMIs, you must be sure to pay the total balance (together with the EMIs) by the deadline. Never overlook credit card debt since doing so might have expensive consequences. Cardholders must pay all fees in full and never carry a balance that may be subject to penalties and interest. Penalties may take the shape of high interest rates that range from 25 to 40%.

Offers and discounts

In general, credit card companies don't give extra discounts or reward points for transactions that are turned into EMIs. In these situations, you must always take into account the value of the reward points or cashback you lost, or the discount you would have received if you had not chosen to convert your EMIs.

If there are discounts available for non-EMI purchases, you should give the EMI option further thought if you can save more money that way.

Processing fee

The bank or credit card issuer often charges a one-time processing fee for an EMI option. The charge could only represent a minor portion of the loan balance. Depending on the credit card category and the purchase amount, certain issuers may additionally levy the fee as a fixed amount.

The majority of cardholders are unaware that they may bargain with the bank or card issuer to get the processing costs waived. However, this may be contingent on the user's brand devotion and impeccable payback history. Users can talk to the bank about this and attempt to get a waiver to lower their overall purchasing costs.

Credit limit deduction

When you choose a credit card EMI, the whole transaction amount—not just the EMI amount—is subtracted from your credit limit. However, the money that you pay in EMIs is added to your credit limit over time. The available limit is dramatically reduced at the time of purchase, so you will have a lesser credit limit for subsequent purchases, even though the amount is refilled as you pay off the EMIs.

Among the many advantages provided, EMIs are unquestionably one of the most alluring characteristics of a credit card. However, consumers must confirm that their credit card offers an EMI capability before using it.

Many people who use credit cards wind up making purchases under the impression that the card would support EMIs. Prior to applying for a credit card, it is crucial to confirm and examine. Additionally, users should attempt to read the EMI payment terms and conditions.

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First Published:18 Sep 2022, 11:00 AM IST
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