How Does Credit Card EMI Work?

By Ashish Sherlekar . December 12, 2023 . Blogs

Credit cards have become an inevitable part of today’s lifestyle. Yet, with the increasing complexity of available options, understanding the intricacies of credit card features can seem daunting. One such feature that often leaves cardholders perplexed but holds the potential to refashion their financial transactions is the “Credit Card EMI” — a mode of repaying credit card bills using EMIs.

Before making the switch to a new card that offers EMI, it is worthwhile for cardholders to understand the concept in detail and evaluate if it is a viable option.


What Is a Credit Card EMI?

Credit card EMI (Equated Monthly Installment) is a financial tool that transforms large purchases into manageable monthly payments – spreading the cost over a predetermined tenure, which typically ranges between 3 and 24 months. This structured payment mechanism allows cardholders to affordably acquire essential items or make substantial investments without disrupting their monthly budget.

While credit card EMIs often carry an interest rate, it is generally lower than the standard credit card interest rate. This makes them a more cost-effective option compared to revolving credit card debt. However, processing fees may apply upon converting a purchase into an EMI.


How Does Credit Card EMI Work?

To effectively utilize credit card EMIs, follow these steps:

Identify Eligible Transactions

Not all credit card purchases are eligible for EMI conversion, as the nature and value of the transaction are the primary determinants of eligibility. High-value purchases, such as electronic appliances, plane tickets, jewelry, and even medical expenses, are often eligible for EMI conversion.

However, each credit card company may have its own set of requirements, so it’s critical to properly review their terms and conditions. This lets you acquire an explicit knowledge of which transactions may be turned into EMIs, and you can then make smart financial decisions and take advantage of this simple payment option.

Initiate EMI Conversion

Once you’ve made an eligible purchase, you can choose to convert it into EMIs through various convenient methods:

  • Online Banking: Most credit card issuers provide an intuitive online portal accessible through their website, where cardholders can log in to their online accounts, navigate to the specific eligible transaction, and initiate the EMI conversion process from the comfort of their computer.
  • Customer Service: If you prefer a more personal touch or have questions about the EMI conversion process, you can contact your credit card issuer’s customer service helpline. They can guide you through the steps required to convert your transaction into EMI over the phone. This option is especially helpful if you’re unfamiliar with the online process or need clarification on the available EMI plans.
  • Mobile App: Several credit card issuers offer dedicated mobile apps. These apps allow cardholders to request EMI conversion with just a few taps on their smartphones. As mobile apps are highly convenient, they offer the flexibility to manage your credit card transactions and EMI requests on the go.

The actual conversion procedure requires completing a form, which is often accessible through the chosen method, and accepting the rules established by your credit card provider. 

Choosing the EMI duration—or the number of months over which you intend to repay the remaining amount—is one of the crucial choices you’ll have to make during this procedure. When choosing a tenure, keep in mind that your financial status and budget will have an impact on the amount of your monthly installments.

Select an Appropriate EMI Plan

Various EMI plans are provided by your credit card issuer when you start the conversion process for your qualifying purchase. These plans have unique characteristics, including different EMI tenures and interest rates. The amount of your monthly payments and the total cost of your purchase are directly impacted by the decision you make here, so it is crucial to get it right.

You may normally pick from a variety of tenures with EMI programs. Higher monthly payments are the result of shorter terms (which are typically between 3 and 12 months), but they have the benefit of reduced interest expenses. Longer terms (ranging between 12 and 60 months or more) produce lower monthly payments but result in higher total costs since more interest is accrued over time.

Scrutinize EMI Details

Examining the EMI plan’s details is crucial before confirming your EMI conversion. You can avoid unforeseen expenses and unpleasant financial surprises by paying great attention to the following important factors:

  • Interest Rate: While some EMI plans can provide zero or minimal interest, the majority will have a rate that raises the price of your purchase. So, make sure you are aware of this rate because it will directly affect how much you pay overall for the duration of the EMI.
  • Processing Fees: Processing fees are charges incurred as a result of the EMI conversion procedure. These costs may differ between credit card companies or the respective financial institutions and may further depend on the EMI plan you select. 
  • Prepayment Terms: Prepayment is the choice to pay off the remaining EMI balance before the planned duration expires. If you have the resources, you may prepay some EMI plans without incurring any fees. This gives you more freedom to pay off your debt faster. However, some EMI plans might have prepayment charges or restrictions.

Adhere to Timely Repayments

Once you’ve converted your purchase into an EMI plan, it’s crucial to stay on top of your monthly payments. Failure to do so can lead to undesirable consequences, including late payment fees and additional interest charges—ultimately increasing the cost of your purchase.

Your monthly EMI amount is typically automatically debited from your credit card account on a predetermined date, which is set when you initiate the EMI conversion. Also, to ensure seamless repayment, it’s pressing to have sufficient funds in your account to cover these payments.


The Bottom Line

Credit card EMI is indeed a valuable feature that allows cardholders to spread the cost of high-value purchases over manageable monthly installments. However, be cognizant of the specifics around processing fees, interest rates, payment terms, etc., since these can vary across banks.

Read more about the latest trends in the credit card space:

Ashish Sherlekar

Ashish is a Principal Consultant at Verinite. He is Certified Scrum Master and SAFe Agilist with a demonstrated history of providing service in Retail and Commercial banking domain at various geographical locations. He is passionate about Music and loves singing. He believes in “You must be the change you wish to see in the world.

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