Credit Card EMI: Things To Keep In Mind Before Opting For It

We all have desires in life. It could be anything starting from wanting to buy a car or going to a dream destination, and the list can go on. But exhausting your entire life’s savings to accomplish a mission is definitely not wise. This is where credit cards come in handy.

They make your life simple by easing your financial burden and eliminating the need to carry hard cash. Additionally, breaking up your credit card purchases into small monthly installments can help you get high-value goods without having to burn your pockets.

The thing is, EMI on a credit card is convenient and useful as long as you use it wisely and carefully. But before you convert your expenditures into EMIs, there are some factors that you must bear in mind.

Let's take a look at those factors before opting for EMI on your credit card:

1. Available Credit

When you opt for an EMI on your credit card, always make sure that you have sufficient credit on your card. The existing credit amount must be higher than or at least equal to the amount you wish to convert into EMI. This will prevent your EMI request from being rejected.

2.  Processing Fee

This is another essential credit card information you must know before taking an EMI. Many banks or financial organisations tend to charge a nominal processing fee when you choose to convert your purchase into monthly installments. While the processing cost is a one-time fee that may be between 0 and 3% of the total, foreclosure fees apply if you choose to pay off your loan early in full or in part. Therefore, always read the terms and conditions before opting for one. On the other hand, many banks provide cost-free EMIs. In such a scenario, these fees are either disregarded or modified in the form of a rebate, bringing the total EMI to the amount of the goods.

3. Restricted Credit Limit

Another important criterion of a credit card EMI is reduced credit limit. This happens the moment your EMI plan begins. Your bank will momentarily set aside money equivalent to the cost of the purchase you made using the EMI option. As a cardholder, you will be restricted from spending till your upper limit until you complete your entire EMI. The restriction on the card will be gradually lessened with each EMIs and completely removed when the full amount is paid.

4. Right Duration

Typically, credit card providers offer a lower interest rate for a longer duration. But you must first know how much interest you will ultimately have to pay over the course of the lengthier tenure before choosing it. Read the terms and conditions carefully before opting the tenure as every credit card company offers different interest rates.

5. Reward Points

Credit card providers often do not offer additional discounts or loyalty points for buys that are converted into EMIs. In situations like these, you should always take into account the value of your reward points or discounts you would have received if you hadn't taken an EMI. What happens then is, if there are discounts available for non-EMI purchases, you can give up on the EMI option and save more money that way.

6. Better Credit Profile

When a consumer opts for an EMI, there are fewer odds of them defaulting while making those monthly payments. Besides, the payments help people progressively build up their credit histories over time.

Among the many advantages provided, EMIs are unquestionably one of the most alluring characteristics of a credit card. The wiser choice is always to choose EMIs if you don't have enough cash on hand. However, always remember to choose EMIs with the aforementioned considerations in mind as they will enable you to utilise the advantages and save more.