Purchasing big-ticket items can strain your finances significantly. To aid you in such a situation, whereby you can buy the products you need without draining your savings, credit card issuing authorities offer a special advantage known as the credit card EMI. Using this facility, you can pay for an item over a period of time, by converting it into Equated Monthly Instalments or EMIs. As a result, you end up paying at your convenience.
The credit card EMI facility lets you borrow funds on your credit card to pay for the item you wish to purchase. You can then decide on a repayment tenure during which you would need to pay back, every month, a portion of that amount, and any other additional charges, as EMI.
It is very easy to avail the EMI option on credit cards. You can either avail Merchant EMI, whereby you can convert your credit card bill at the time of the purchase. Several banks have partnered with online shopping portals as well as retailers to make the EMI facility accessible to all. You can make a down payment with the funds you have and the rest you can convert into EMI by choosing a preferable tenure. Once processed, the repayment schedule would be sent to you by mail and the payable amount would reflect in your credit card statement.
Alternatively, you could also convert the credit card bill after the purchase is complete by visiting the bank’s website, app, or by calling their 24 x 7 customer helpline.
Converting your purchases into EMI has several advantages-
The EMI interest rate depends on your tenure- shorter tenure implies lower interest rate, while longer tenure attracts a higher interest rate
Usually, interest is charged at the end of every month on the loan balance, which reduces the interest charges you end up paying with every passing month
Most banks offer a comfortable repayment tenure usually ranging between 3 and 24 months which is long enough to repay at ease with a reduced interest charge
There are special offers introduced by banks from time to time for specific periods where charges are reduced or waived, such as processing fee, which makes it ideal for saving more money
You can close the loan before the tenure has ended by paying a foreclosure charge, which may in some cases be waived off if you have a good rapport with the bank
Fees and Charges Applicable for Converting Credit Card Payment to EMI
The credit card EMI conversion procedure attracts certain fees and charges, which varies from bank to bank. Here are a few of such fees and charges levied against your credit card EMI-
Interest Rate- A special EMI interest rate is charged on the credit card bill once converted into EMI, which depends on several factors- card type, your repayment history, your relationship with the bank, etc.
Processing Fee- A processing fee, ranging up to 3 per cent of the total amount transacted, may be charged by the bank, based on your card type.
GST- 18% Goods and Services Tax will be levied on all fees and charges as a part of the government directive.
Foreclosure Charges- Closing the loan before the end of the tenure can attract up to 3% of the outstanding dues as foreclosure charges. Pro-rata interest charges can also be levied in such a case.
Now that you know how to convert credit card bill into EMI, here are a few things you should know before opting for it-
Not all credit cards support the credit card EMI conversion process
Purchasing on EMI reduces your credit card limit by the purchase amount but it increases again when the EMIs are paid on time
Several popular e-commerce platforms have tie-ups with banks that offer EMI, which can be used to get great EMI deals
The processing fee, which is a small percentage of the total loaned amount, may or may not be charged by the bank
In most cases, unless otherwise mentioned, clearing your credit card EMI before the end of the tenure attracts pre-closure charges
As debt on a credit card can easily become a burden with piling interest and penalties, you should make it a point to clear your outstanding dues in full, on time
To calculate the credit card bill EMI, you need to take into account the fees and charges, such as interest rate and processing fees, levied by the bank. The credit card EMI would then be a product of the tenure, interest rate, processing charges and the total amount left to repay. To make the process of calculating the EMI, you can also refer to a credit card EMI calculator.
To make it easier to understand the costs involved in availing the credit card EMI option, most credit card issuing banks offer a credit card EMI converter tool in the form of a calculator once you apply for credit card. This tool is known as the credit card EMI calculator and can be found on the bank’s credit card app or website. You can enter the amount you wish to convert and the tenure of the credit card EMI payment into the calculator. When you submit the information, the calculator will display the EMI you would need to pay. Accordingly, you can adjust the tenure to find the right EMI plan for you.
No, all banks do not charge processing fees. Some simply levy a nominal fee for availing the EMI facility. These details can be found on the official app or web page of the respective bank.
Converting your dues into EMIs is a great way of saving money as the interest rate on EMIs is usually lower. It also lets you borrow time so that you can repay conveniently.
If the item is returned before the EMI conversion has been processed, the entire amount is refunded. However, if the EMI conversion has been processed before the item has been returned, the entire amount may not be returned to you and you might need to pay GST, interest and pre closure charges. However, if you have applied for the option of no cost EMI on your credit card, no fees will be charged and you would get the amount back in full.