Credit Card EMI

Credit card providers offer customers the option to convert their outstanding bills or purchases into Equated Monthly Installments (EMIs). This feature allows customers to divide large bills into smaller, manageable payments spread over several months or years, according to their repayment capacity. Below are details on credit card EMI conversions.

Important Details on Credit Card EMI
Processing Fee Nil to 3%
Pre-closure Charges Nil to 3%
Tenure Up to 48 months by certain banks
Minimum transaction amount Vary from bank to bank
EMI Interest Rate for 1 Year (Post Purchase) 12.5% p.a. onwards

How to Apply for Credit Card EMI Conversion?

Most credit card providers offer customers the option to avail of this facility either post-purchase or at the time of purchase. You can apply for credit card EMI conversion in two ways, as outlined below:

Merchant EMI Conversions

Cardholders have the option to convert their purchases into EMI at the time of payment, applicable for both online and retail transactions. Simply inquire with the cashier for the EMI payment option during checkout. For online transactions, choose the ‘Pay via EMI’ option to utilize this facility. Please note that the merchant EMI option might be accessible only with selected merchants.

Post Purchase EMI Conversion

If cardholders are unable to convert their purchases into EMIs at the time of purchase, they can opt for a post-purchase EMI conversion facility, which may have various names depending on the bank, such as HDFC Bank Smart EMI, SBI Card Flexipay, and others. Terms and conditions may vary across providers. You can avail of this facility through net banking or mobile banking. Additionally, some banks offer the option to convert purchases into EMIs through customer care or SMS.

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Credit Card EMI Conversion: Fees & Charges

The fees and charges associated with credit card EMI conversion vary from bank to bank. Additionally, within the same bank, different credit cards may have different interest rates. However, the interest rate, processing fee, and pre-closure charges for some of the top credit card providers are outlined in the table below:

Credit Card Provider Interest Rate Processing Fee Pre Closure Charges
HDFC Bank 18% p.a.* | 15% p.a. onwards** 1% of the amount (Min. Rs. 150) 3% of the outstanding amount
ICICI Bank 15.96% p.a.* | 12.99% p.a. onwards** 2% of the amount -
Axis Bank 18% p.a.* | 13% p.a. onwards** 1.5% of the amount (Min. Rs. 150) 3% of the outstanding amount
Bank of Baroda 18% p.a.* | 13% p.a. onwards** 2% of the amount (Min. Rs. 100) 3% of the outstanding amount
SBI Card 22% p.a.* | 14% p.a. onwards** 2% (Min. Rs. 99 | Max. Rs. 1,000) 3% of the outstanding amount
RBL Bank 13% p.a. onwards** - 3% of the outstanding amount
Standard Chartered Bank Starts from 12.96% p.a.* | 13% p.a. onwards** 1% Nil
Citibank 24% p.a.* | 13% p.a. onwards** 2.5% of the amount (Min. Rs. 200) 3% of the outstanding amount

* Post Purchase EMI interest rate | ** Merchant interest rate.

Credit Card EMI Conversion: Pros & Cons

Converting your credit card purchases or dues into EMIs can be advantageous for many individuals. However, like any financial option, there are both advantages and disadvantages associated with this facility:

Pros of Credit Card EMI Conversion

No-cost EMI: Some banks have teamed up with merchants to offer EMIs without any interest or processing fees. If customers have this option available, they should choose it over the regular EMI conversion.

Deferred Payment: Customers can buy expensive items without paying all at once. Instead, they can pay a little bit each month until it's all paid off, based on what they can afford.

Low Upfront Financial Strain: Because customers don't have to pay the full amount at once, they don't feel the full financial pressure right away. This is really helpful for people who have a set monthly income and need to stick to a strict budget, like those who use credit cards.

Cons of Credit Card EMI Conversion

Blocked Credit Limit: When you make a purchase using EMIs, the amount you spend is held against your credit limit until you finish paying off the installments. This means your available credit limit is temporarily reduced until you've completed the payments.

Interest Charged: Banks and NBFCs don't offer EMI conversion for free. They usually charge interest and a processing fee. The interest rate for credit card EMIs usually starts from 12.5% per year, but it can be different depending on the bank. This interest can reduce the money customers save, especially if they choose a longer repayment period.

Increased Credit Utilization: When you convert a purchase into an EMI, the EMI amount remains reserved against your credit limit. This lowers your available credit limit, so any new purchases you make will eat into the remaining credit limit. This can raise your Credit Utilization Ratio (CUR). If your CUR exceeds 30%, it could cause your credit score to drop.

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Things to Remember about Credit Card EMI Conversion

Converting your large purchases into EMIs can be a relief for many people. However, before deciding to do so, cardholders should consider the following factors:

  • Timely Payments: You should select the EMI option that allows for easy and timely payments, as missing or making partial payments can outweigh the benefits of EMI. Here are some potential issues you might face:
    • Credit Score: Banks report missed payments to credit bureaus like CIBIL and Experian, which can lower your credit score. Opting for a plan that allows you to make timely payments can help in building and maintaining your credit score.
    • Lost Interest-free Period: EMI conversions don’t remove interest-free periods, but missed payments can. That's why it's crucial to make payments on time.
    • Credit Card Interest Rate: When cardholders don't clear their bills by the due date, credit card interest rates, typically around 42% per annum, are applied. This is in addition to any EMI interest rates. This can result in substantial interest accumulation, ultimately depleting the customer’s savings.
  • Credit Card Provider: Credit card providers often have varying interest rates, and even cards from the same bank can have different rates. So, customers with multiple cards should compare the interest rates on each card before choosing to convert a purchase into an EMI.
  • Lost Benefits: In some cases, converting purchases into merchant EMIs might result in the loss of other benefits such as reward points or discounts. If these benefits are substantial, it's advisable for customers to consider making an upfront payment instead of opting for EMIs.
  • Tenure: Banks often offer lower interest rates on longer tenures, making the EMI installments smaller and more attractive. However, users should avoid this option as it can lead to higher overall interest payments.

Frequently Asked Questions (FAQs)

1. What if I pay more than my EMI amount?

If you pay more than the bill amount, the surplus amount will appear on the next credit card statement. It will be adjusted against the outstanding amount for the following month.

2. How does credit card EMI work?

Credit card EMI conversions happen instantly, but occasionally they may take a few days. During this time, the purchase amount becomes blocked against your credit limit. Afterwards, you'll need to pay the monthly EMI amount, which will show up in your credit card statement. Once you've made the payment, the EMI amount will be released from the blocked limit.

3. Do banks levy a processing fee on all credit card EMI conversions?

Not all banks charge a processing fee when converting purchases into EMIs. Many banks offer this facility without any additional charges. Additionally, in some cases, you can opt for a no-cost EMI option.

4. Can I pay off all the EMIs on my credit card in one go?

If you wish to clear all your outstanding EMIs, you'll need to request a pre-closure of the EMI. In this case, you'll be charged a pre-closure fee, which is usually around 3% of the outstanding principal amount. Additionally, if you don't clear the bill by the statement generation date, the full amount will appear on the next month's credit card statement.

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