EMI and Credit Card: How Does It Work?

Did you know that you can fund your costly purchases via credit card and pay off the dues in monthly instalments?  Yes, you can choose credit cards that offer flexible payment options for buying consumer electronics, home accessories, mobiles, or any other expensive product. This financing option is highly lucrative since it allows you to access easy credit with the option of repaying in not one but over several months. Let us know more about this financing option and its benefits.

Do All Credit Cards Offer Flexible Funding?

When you apply online for your credit card, do check whether the bank does offer you the flexible payment option on big-ticket purchases. This will help you plan out your purchases well in advance. Some banks offer this facility from the date of issuing the card while others may wait for a few months to activate this benefit. The EMI offer is available to customers who fulfil the eligibility norms relating to their credit score and the track record of repaying previous loans.

How does this work?

This option of buying a costly item and paying for it in equated monthly instalments that are added to your credit card every month is available on only select purchases.

• The offer could be available only on purchases above a certain amount or made during a specific period like a festival. So do check the offer terms when you fill your credit card application.
• The offer could also be available on items bought from specific retailers.
• The EMIs may be interest-free on certain products when purchased from a specific retailer or carry certain interest charges. The interest rates on EMIs may vary from the interest rates on your credit card outstanding amount. It makes sense to use this option only when the interest cost is lower than the one applicable to your outstanding amount.
• The credit card company may charge you a certain processing fee for such purchases.
• The EMIs can range from three months to a couple of years.
• The EMI is calculated based on the interest rate charged by the bank, the number of instalments, and the amount paid as a down payment.

What effect does an EMI have on your credit card limit?

Once you have availed of the flexible financing option available on your credit card, the following changes take place:

• Your monthly credit limit will stand reduced by the amount of the EMI.
• Your due amount for the month will include the EMI amount.
• Your minimum due amount will include the EMI amount.

When to Go for The EMI Option?

The EMI option on your credit card is highly convenient and advantageous as it allows you to spread your expenses over a couple of months. You should go for this option:

• If you cannot pay off the full price in less than three months.
• If your card charges minimal or zero processing fee for funding such purchases.
• You have enough credit limit to cover the EMI amount and other normal expenses.

When you apply online for a credit card, do check the eligibility conditions for availing of the EMI offers and the applicable interest charges.