Credit card holders often get messages on their smartphones regarding the credit card EMI facility. However, not many people possess a clear concept about it.
And this lack of knowledge unlocks a question in the users’ mind. They want to know what the ‘credit card EMI’ actually means. It is actually a facility that allows you to convert your large purchases into several smaller, manageable monthly payments. In short, it gives you relief from paying the full amount at once.
Banks in India often offer EMI options when users aim for big purchases like electronic goods, travel bookings, and appliances.
How Credit Card EMI Works
In credit card EMI, the total purchase amount is divided into equal monthly instalments over a fixed tenure. In EMI the tenure usually comes in 3, 6, 9, or 12 months, and sometimes longer.
Some EMI comes with an interest rate or gets labelled as “no-cost EMI”. And this decision completely depends on the given offer.
In a no-cost EMI facility, the interest component is often adjusted as a discount by the merchant. And so, you don’t have to pay an extra amount beyond the product price.
On the contrary, in regular EMI options, interest is charged on the outstanding amount. Undeniably, this increases the total cost of your purchase. Moreover, the EMI amount is added to your monthly credit card bill. That means you are advised to pay it along with any other outstanding dues.
Benefits of Using Credit Card EMI
The biggest advantage of using credit card EMI is its affordability. Yes, it allows you to buy high-value items without putting pressure on your monthly budget.
Another key advantage is it also helps in managing cash flow. Yes, when you need to make an essential purchase but prefer spreading the cost over time, the EMI feature is the best to help you here.
EMI options are often available instantly at online and offline checkout and thereby ensure convenience as a notable benefit.
When Should You Use It?
Every credit card holder should understand thatusing a credit card EMI can be a meaningful step when the purchase is necessary and fits within their repayment capacity.
For example, purchasing essential appliances or covering urgent expenses can undeniably justify using credit card EMI.
However, before approaching any financial step it is important to check the details. Similarly, it is essential to check interest rates, processing fees, and total cost before opting for the EMI feature.
Even no-cost EMI options sometimes include hidden charges such as GST on interest or processing fees. Therefore, it is essential to stay informed completely before obtaining the EMI feature.
When to Avoid It
Remember, purchase means expenditure. And expenditure means draining the hard-earned money. So, be conscious and avoid using credit card EMI for non-essential or impulsive purchases.
Also, converting multiple transactions into EMIs can lead to a high fixed monthly obligation that ultimately hammers your financial flexibility.
Final Thoughts
As usual, credit card EMI can be a very useful tool if you choose to use it with utmost awareness and responsibility.
You should know that you can manage large expenses without pressuring your finances if you have a clear understanding about costs and plan your repayments carefully.