Credit Card EMI – How does it work?

You can make credit card repayments in three ways. The simplest and most efficient method is to settle the entire bill before the due date without paying interest. The second option is to pay a minimum amount due and carry forward the balance by paying interest on it. Finally, you can pay the outstanding amount in equated monthly instalments (EMIs).

Before opting for this feature, it is vital you know how credit card EMIs work. Let’s begin by understanding the implications of changing a payment into an EMI transaction on a credit card. Once you convert your credit card bill into smaller monthly instalments, you must pay interest.

How do credit card EMIs work?

Credit cards can be excellent financial tools, but it’s easy to overspend when using them. A one-time splurge, missed payments, or an unavoidable high expense can lead to debt. However, credit card EMIs can help manage this debt. From a free credit card to an instant online credit card, every credit card allows you to convert your dues into EMIs.

Using this feature, you can set a credit card EMI limit. Ensure that the limit is within your reach and does not disrupt your financial state.

Also read - What is EMI Full Form

Types of credit card EMIs offered by banks

Almost every credit card company offers two types of EMIs. The first comes with no interest and the other with a lower interest rate. The former is a free, zero-interest EMI, while the latter is a low-interest EMI.

1. Zero-interest-rate EMI/ No-cost EMI
 

A zero-interest-rate EMI or no-cost EMI is an excellent choice for making large purchases affordable. In this case, you do not have to pay extra for EMIs. As there is no interest rate involved,  zero-interest EMIs or no-cost EMI credit cards are a great choice for shopaholics.

However, most zero-interest rate EMI or no-cost EMI credit cards in the market are available only on specific products and services. Moreover, they can be used only at a handful of online and offline stores. There is usually a processing fee involved, which can start from ₹199 + GST.

2. Low interest rate EMIs
 

Low interest rate EMIs give you a reduced rate of interest compared to mainstream credit cards. It is significantly lower than the rate of interest imposed by credit card companies if you miss or generate late payments. If you choose this option, remember that the bank will impose a processing fee for changing your outstanding balance into EMIs. You may be charged a pre-payment fee if you want to pay in advance.

Typical costs associated with credit card EMIs

It feels good to reduce your debt by converting your credit card dues into EMIs. But you must be prepared to pay additional fees and reduce your limit.

1. Processing fee
 

When you transfer your outstanding balance into easy EMIs on the credit card, banks levy a handling fee. This handling fee is a one-time payment. Depending on the bank's decision, a flat cost or a proportion of the total sum will be imposed as a handling fee.

2. Interest charges
 

While the EMI facility provides convenience and flexibility, the interest charges associated with it can significantly impact the overall cost of the purchase.

The interest charges on credit card EMIs are typically calculated daily, using the outstanding loan amount and the prevailing daily interest rate. This means that the interest charges accumulate on a daily basis, resulting in a higher overall amount payable at the end of the loan term.

3. Late payment fees
 

Customers who opt for EMIs on their credit cards should also pay attention to the minimum repayment amount specified. Failing to meet the minimum repayment amount may result in additional fees and charges, as well as a negative impact on their credit score.

FIRST SWYP Credit Card: Best for credit card EMI payments
 

If you are planning on making big-ticket purchases in EMI, consider opting for the FIRST SWYP Credit Card. This credit card offers the EMI conversion facility on all transactions above ₹2500, while eliminating interest rate complexities.

All you need to do is pay a flat monthly fee for the EMI on credit card conversion starting from ₹49 + GST. This way, you can easily spread your expenses across 3 to 36 months, making it convenient to manage your finances. Besides not including any processing fees, the FIRST SWYP Credit Card also offers a host of deals from top merchants such as Domino’s Pizza, Zomato, EaseMyTrip, TATA Cliq, and many more! Additionally, unlock 300+ offers every day of the week.

You can choose from two types of EMI on credit card facilities via the FIRST SWYP credit card:

• Transactional EMIs

Instead of paying for large purchases upfront, you can convert them into EMIs, making these purchases easier to manage. You can choose any transaction over ₹2500 to convert into EMIs.

• Bill payments

With the FIRST SWYP Credit Card, there is no concept of revolving credit. This means that you can either choose to pay your credit card bill in full or convert it into EMI payments for a flat monthly EMI conversion fee. This helps in building responsible credit usage, as all dues get paid over a fixed period.

Also, remember not all banks and credit cards allow you to convert your credit card dues into EMIs. Most business credits cards have this option, but it is wise to first check before making a large purchase. If you wish to learn more on the subject, visit the Metra Trust’s website to find all the information you need. Metra Trust has many options to choose from with EMIs and credit cards. The bank also offers competitive interest rates and easy payback options for you to avail of.
 

Disclaimer

The contents of this article/infographic/picture/video are meant solely for information purposes. The contents are generic in nature and for informational purposes only. It is not a substitute for specific advice in your own circumstances. The information is subject to updation, completion, revision, verification and amendment and the same may change materially. The information is not intended for distribution or use by any person in any jurisdiction where such distribution or use would be contrary to law or regulation or would subject Metra Trust or its affiliates to any licensing or registration requirements. Metra Trust shall not be responsible for any direct/indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information mentioned. Please consult your financial advisor before making any financial decision.