EMI on credit cards can be a great way to manage your finances by making large purchases more affordable and budget-friendly. If you are wondering what is EMI on credit cards and how it works, you first need to understand what EMIs are.
Whether you’re shopping for electronics, home appliances, or even a vacation, converting your bill into easy monthly instalments can make your spending less overwhelming. Read more to learn more about EMI on credit cards and how it works, and more on advantages.
What is EMI on a Credit Card?
EMI on credit cards is a functionality that you can use to split your one-time payment bills into multiple monthly instalments. This function is helpful in case you want to save the remaining credit limit for other expenses. It also allows you to reduce the amount you need to repay in one shot when your credit card bill is due.
In this way, you can plan your finances more effectively. You can easily choose to pay through the EMI option when making purchases and select a flexible monthly tenure from the available options.
How Does Credit Card EMI Work?
Depending upon different factors, your bill or transaction amount is divided into several smaller transactions that you will need to repay monthly. These monthly transactions can vary depending on the interest charges applicable by the bank, the tenure you select and the down payment for the item.
However, some schemes on credit cards allow you to convert the entire bill into EMI without the need for a down payment. In some cases, you can enjoy zero-cost EMIs, which means you do not need to pay any interest.
For example, if you purchase a refrigerator worth ₹50,000 and you choose to pay ₹10,000 as the down payment and convert the rest of the amount into EMIs. Now, you choose a tenure of 6 months and the interest rate applicable by the bank is 15% p.a.
As per the interest, the total cost to be paid will become ₹43,000, as ₹3,000 will be the interest amount for a 6-month tenure. So now, you will have to pay ₹7,167 per month as the EMI bill for your refrigerator.
Converting Credit Card Payments into EMIs
While most cardholders can enjoy the EMI facility, this may not be available to you if you have defaulted on your last few bills and have a high unpaid balance. So, check its availability before making the purchase. Usually, you can call customer service or login to your credit card account on the computer or mobile app to check if you can avail of the facility.
Advantages of Using the Credit Card EMI Facility
Other than knowing the basics of EMI on credit cards, it is also necessary to look at some advantages before you choose this option and ensure that it suits you.
- Most banks and financial institutions use a reduced balancing method to apply the interest on the remaining loan balance
- Banks allow you to choose a flexible repayment tenure which can range from months to years as per your convenience
- Some specific banks and financial institutions allow a processing fee waiver or might charge a nominal processing fee
- You can also choose to foreclose the EMI before tenure and repay the remaining amount in advance without any restriction
Types of EMIs on Credit Cards
There are two major types of EMI facilities on credit card payment options. They are detailed here.
- No-Cost EMI: This type of EMI offers no additional interest. This type of facility seems similar to an interest-free loan. Many credit cardholders prefer to choose no-cost EMI while making expensive purchases.
- Low-Cost EMI: This type of EMI provides lower interest rates, which makes it more affordable to split large bills.
As mentioned, credit card EMI is a facility where you can choose to pay your credit card bill in multiple instalments rather than paying a lump sum amount. Through a credit card EMI facility, you can get several advantages, such as low interest rates and flexible tenures.
If you’re looking for a credit card that allows you to convert your purchase or bills into EMI with ease, go for the One Credit Card. Its powerful mobile app, the OneCard App, helps you convert bills into EMIs instantly. It also offers other benefits such as 5X reward points, a variety of offers, and easy budgeting and tracking of all transactions. The best part is that this stylish card has no annual, joining or rewards redemption fee. Apply online now and make expensive purchases pocket-friendly!
