The fundamentals of EMIs in credit cards


Equated Monthly Installments or EMIs are the new way to pay your credit cards bills. So read on and get the most out of it.

Availability

A credit card holder must ensure at the outset that the issuer of the card has an option to avail this facility as it is not available at all times. The card issuer usually specifies the conditions that only specific purchases from select stores would be eligible to avail the EMI benefit.

Purchase limit

Sometimes, the EMI option is applicable only if as purchase has been made above a specified limit. Usually, the expense limit is Rs 3,000 to Rs 5,000, and the EMI option is available once expenditure crosses this limit at a specified store or within a specified period predetermined by the card issuer.

Interest rates

Banks offer this option when they want consumers to spend more through additional purchases. Therefore, such an offer is mostly made available on new purchases under a specific scheme. Payment terms are also kept simple as the total is divided into equal parts. For example, a purchase of Rs 12,000 can be paid in 6-12-month installments. In this option one saves on the interest and can pay the total outstanding of that particular purchase in equal amounts over a period of time.

One needs to keep in mind that even when the repayment process is divided into easy EMIs, some amount of interest is usually tagged with the payments although they are far lower to the normal rates charged by the credit card issuer. Most EMIs are tagged with interests in the range of 1.25-1.99% per month. The time period of EMIs must also be considered. For instance, if the purchase needs to be settled in six months and the EMI option is available only for 12 months; the card holder will have to unnecessary pay higher interest even when the rate being charged is lower.

EMIs on big Purchases

Many banks offer to convert a purchase into EMIs and it does seem like an easy way to pay your dues. However, before you agree, do check the following.
Processing fees
Interest rate
Prepayment charge
Flexibility in time periods



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