Wondering how a credit card EMI works? It’s simple and not as complicated as you may think. Credit cards provide a ‘buy now pay later’ feature on their transactions. Credit card EMI is one of the ways you can draw credit from the bank over time as a ‘loan’.
It is a great alternative when you want to buy things immediately without having adequate funds or decide to pay later. The EMIs on credit cards are similar to your loan EMI, where you must pay a certain amount of funds with interest across a fixed period.
That said, some issuers may offer no-cost EMIs, wherein you don’t need to pay interest along with your monthly instalments. Remember, this may be a promotional offer, so you need to assess the terms and conditions before opting for this facility.
Hence, it is essential to understand how does credit card EMI works without falling into a debt trap.
The underlying principle of this facility is that it helps you convert big-ticket expenses into affordable instalments. You need to pay across a timeline of your choice. Most issuers offer a repayment duration ranging from 3 to 24 months.
Here are some key aspects of how this facility works:
- Most issuers levy lower interest rates when compared to normal credit card interest rates.
- While you can select a tenure of your choice, remember that the longer the duration, the higher the interest outgo
- Opting for the EMI facility decreases the available credit limit
- The minimum amount due on your credit card increases as the EMI amount gets added to the bill amount
- Issuers calculate the EMI based on the total purchase value, chosen tenure and interest rate
- You can use an EMI calculator to compute the monthly instalments beforehand
Credit card issuers provide credit cards with conversion options and varying interest rates. Now that you are familiar with credit card EMIs, know some of the most common types of EMIs offered by issuers:
- Zero-interest EMI: It works like an interest-free loan on a credit card. Some credit cards may charge a small fee for using them.
- Low-cost EMI: It is a low interest EMI option where the interest rate can vary from 1.25% to 1.99% every month.
Apart from the interest rate, two additional charges add up to the cost of credit card EMI conversion.
Processing fee: Credit card issuers impose a processing fee to convert the outstanding balance into easy EMIs. The handling fee is a flat amount, or a percentage of the total amount, but a one-time nominal sum.
Reduction in the credit limit: The credit limit of your card can be reduced by the total principal amount. When you pay all the instalments, this amount is freed from the blocked credit limit. Simply put, you can’t utilise the entire credit limit until you clear the dues.
How To Convert a Credit Card Payment into EMIs
At the time of your purchase, choose the EMI option. Make the down payment and pay the balance in easy instalments. However, it is essential to check your eligibility, which depends on your credit score, monthly bills and repayment schedules.
Set the tenure of EMI and verify the terms and conditions before you apply for the conversion.
Checklist Before You Apply for the EMI
Here are some important points to note:
1. Check the Option on Your Credit Card: Many credit cards don’t have this option or may only have it on some products. For example, the One Credit Card doesn’t have the option of EMI on cash withdrawals, gold jewellery, fuellottery,ry or gambling websites.
2. Processing Fee: The fee is charged based on your loan amount. It is negotiable through loyalty points issued by the banks, which can provide a waiver for this fee.
3. Settling the Claims in Full: Avoid penalties on late payments on credit card bills by making the payments in full.
Payment through EMIs has several advantages, as they are budget-friendly, allow multiple purchases, and make better financial planning possible. Whether you fuel credit card apply online or any other card, understanding these critical aspects is essential.
Are you still wondering how to use the One Credit Card for purchases and choose EMI as a repayment option?
Well, applying for EMIs is no longer a hassle. Enjoy financial freedom with the completely digital One Credit Card EMI, which comes with the One Credit Card App. Get the lowest interest rate of 1.33% monthly and repay your dues conveniently in 3–24 months.
Use the intelligent built-in dashboard to track your EMIs at your fingertips. This gets more amazing as you get reward points on your transactions converted to EMIs, and you can repay your EMIs with the reward points. So, what are you waiting for? Apply now.
