credit cards offer you the facility of paying your bill through EMIs or equated monthly instalments. each instalment includes the principal loan amount you owe to the bank and the interest. this instalment has to be paid every month by the due date or else you need to pay the penalty.
it's important for you to monitor your payments monthly and set a reminder for the due dates. you could also download certain apps through which credit card bill payments can be made like CRED that reminds you before your due dates. if you have problems setting reminders and are regularly defaulting, then you could download these apps.
the credit card EMI calculator helps you determine your monthly credit card payout. the amount of each instalment is the same. you need to enter the principal amount of the loan, the interest rate, and the tenure of the loan.
you can find your total loan amount in seconds with the online financial calculator. the total amount you pay as interest will also depend on whether you take any loans after the free-credit period that is calculated 20 days from the bill date. if you take a loan before settling your first loan, then your EMI will go up.
EMIs help to reduce your financial burden, and you can pay the loan easily in instalments. if you have purchased high-value items like a laptop on your credit card, you can pay it in affordable instalments. you need to use the revolving credit facility that credit cards offer and pay just 5% of the loan amount.
the EMI instalment will be added to your card and will show in your monthly bill. the bank will check your credit background, loan repayment record, current loans, and your credit score before letting you avail of the EMI facility. if they find you are eligible, you will be allowed the EMI facility on your card.
before you decide to buy anything using the EMI facility of credit cards, here are some points to remember:
1. only offered by select cards
your credit card should have an EMI facility. before you try to buy something online or offline using a credit card, check with your bank to see if you have the facility.
2. lower credit limit
every credit card has a credit limit. when you buy a high-value item using a credit card, your credit limit is reduced by that amount. for example, if you have a credit limit of ₹50,000 and buy a laptop for ₹30,000, then your credit limit stands reduced to ₹20,000.
the credit limit is restored to ₹50,000 only when your EMIs are paid on time.
3. processing fee negotiable
the bank charges a processing fee on the principal loan amount when providing the EMI facility. it can either be a percentage of the total loan or a specific amount depending on the purchase value.
depending on your credit background and relationship with the bank, the fee can either be reduced or waived.
4. online purchase is a better option
there are certain online shopping portals like Amazon or Flipkart that have tie-ups with banks to promote themselves. you can avoid the offline retail commission when you buy online and get better discounts. there is also a great deal of flexibility when it comes to EMI tenures with a wide range from 3 to 24 months.
5. prepayment penalty
when you opt for the EMI facility on a credit card, there is a penalty for prepayment of the principal amount. this penalty could be waived depending on your terms with the bank.
6. settle your dues in full
even though the EMI facility offers you payment flexibility, it's cheaper to pay your dues in full before the due date on the bill. you avoid paying the interest on the principal loan.
7. have a budget
since the EMI will be a part of your monthly expense, you need to calculate the EMI amount through the loan EMI calculator and check whether you will be able to comfortably pay it or not. it's advisable to create a separate emergency fund for your monthly EMIs so that you don't default.
if possible, choose a shorter tenure and pay off the EMIs as early as possible. the duration of the EMI and your total interest burden are directly related. a higher tenure lower interest rate EMI results in a higher cash outflow compared to a lower tenure higher interest rate EMI.
8. minimum amount
you can avail of the credit card EMI facility only if the transaction is at least worth ₹3,000. the minimum amount varies between banks, so verify it with your bank before you decide to opt for the EMI facility.
9. compare and select
different banks have different terms and conditions when it comes to interest rates on EMIs. compare the interest rates offered by different banks and find one that offers you the best terms.
you can either opt for an EMI directly with the e-commerce portal or pay the amount to the e-commerce portal in full and then go for a credit card EMI with the bank. when you opt for a direct EMI, there is a fixed interest rate that does not depend on your credit score. however, you might get better deals from the portal or merchant EMI offers.
when you decide to pay your credit card dues through EMIs, then the interest rate will depend on the bank's risk assessment and your credit profile. the interest and principal amount are included in the EMIs by the merchant establishments and the banks.
credit cards allow you to make expensive purchases and pay for them in instalments. the credit card EMI calculator helps you calculate monthly EMIs, and you can use it to check whether the EMI is affordable or not.
when you buy something on EMI using a credit card, your credit limit falls, and you might face problems if the credit card is used for your regular monthly expenses. you should have a budget and ensure that your monthly credit card EMI does not exceed that budget.
the EMI will have both an interest and principal component. the longer the tenure of your loan, the higher the total interest payout. try to keep the tenure as short as possible.
use your credit card wisely and spend smartly!