Credit Card EMI Option – A Beginners Guide

Credit Card EMI Option.
Credit Card EMI Option.

Introduction: Hello friends today we are here with a great information of Credit Card EMI option. EMI option on credit cardsEquated Monthly Instalment abbreviated to EMI is the amount which the borrower requires to pay each month to the lender. In most of the cases, an EMI will be the total of principal amount and the interest which is divided by the loan tenure. Anyways, the calculation of interest changes depending on the case.

A step by step guide to credit card EMI option

EMI purchases made with the credit card is almost the same concept. It is another repayment option which has been put forth by the companies which issue credit cards for making debt clearing more easy for the users of the credit card.

Two payment methods of credit card bills which are currently existing

Normally, users of credit cards have to clear their bill on credit card in two methods

  • Full credit card bill payment on or before the due date
  • Partial payment of this credit card bill which is called as minimum payment by the time of the due date.

The first method of repayment mentioned above comes with no interest, except when the users are provided with a repayment window which is larger, the second point comes into existence.

Once you have made the payment of the minimum amount due, the bank will start to charge the interest on the remaining funds on a daily basis.

The latest addition to the repayment options of the credit card is the option of EMI conversion. This option’s availability is completely decided by the bank and the customer. All the banks will not provide this option and not all of the credit cardholders will be able to use it. You will be required to check with your bank about the availability of the option of EMI conversion on your credit card.

You will be able to convert your bills on credit card into EMIs and the famous catchwords will be used by the credit card providers to motivate customers to select the option of EMI conversion on the outstanding amount of your credit card.

Few people will say that the conversion into EMI on credit cards is a trick to tempt the customers whereas others find it very useful mainly when they are making huge purchases by making use of their credit cards.

Though this EMI concept would be simple, most of us will be very confused about using this option of EMI.

However, we will not be able to help you with this decision, but we can try our best to create awareness in you about all the information about this option of EMI conversion which would help you to decide depending on your own financial requirements and situations.

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Working of EMI conversion on credit card bill payments

Conversion of credit card bill payments into EMIs is very similar to getting a loan and then considering to repay it over a particular period. Your complete credit card bill or purchase which is specific to one item can be converted into a loan which allows you to repay it in small instalments every month.

Just like how a loan attracts interest on the principal amount, a specific interest amount will be added to the credit card bill when you are converting it into a loan. This interest will be added to your total amount and the sum will be equally divided over the selected tenure for payment.

The tenure provided on the conversion of EMI will be actually between 3 to 24 months. The longer the payment tenure is, the higher will be the rate of interest. Tenure of 24 months will have more interest rate than a loan with a tenure of 3 months. Anyways, the rate of interest charged on the EMIs of the credit card is relatively less than the revolving rate of interest charged on credit cards and any other late repayments.

Hence, the option of EMI conversion will give you a temporary relief which allows you to pay both the principal amount and interest each month until the total debt is cleared.

Calculation of EMI on credit card payment

Many banks will follow the method of monthly reducing balance for the calculation of EMIs for the payments of the credit card. Unlike the flat rate of interest and rising rate of interest, the reducing rate of interest will benefit you as the interest will be decreasing as the tenure goes by.

In the method of monthly reducing balance, the application of the rate of interest will be to the principal amount which will decrease each time you are making a payment of EMI. That means that the interest will be charged only on the remaining balance of the loan, which is the difference between the original amount of loan and the EMI loan amount you have paid until now.

Though the amount of EMI will remain the same over the payment tenure, the payment which is made towards the principal and interest will keep changing each month. This means that you will have to pay less amount of interest as your loan keeps decreasing over the period.

Conversion of credit card bill payments into EMIs

Conversion of Credit Card Bill Payments into EMIs.
Conversion of Credit Card Bill Payments into EMIs.

There are two methods in which the banks will offer conversion of credit card bills into EMIs

  • Conversion of your complete credit card outstanding amount into EMIs.
  • Conversion of one particular retail transaction.

The first option allows you for the conversion of total credit card outstanding balance amount into EMIs. Anyways, not all the banks will provide this nor every cardholder will be able to use it. You will be required to get in touch with your respective bank for checking your eligibility. You can also consider checking your net banking account for knowing about the same.

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Once you are confirming the availability of the option of EMI conversion, you will be required to follow a bank particular method to use this option. Several banks will come up with different methods of conversion of your credit card bill into EMI. A few of them will include the usage of phone banking, net banking or just by sending an SMS.

In the second option, you will have to make retail transactions. It can be either online or offline. These will be eligible for conversion into EMI by making use of their credit cards. Most of the banks have partnered with top brands across industries for providing the best deals of EMI for you.

Once you have made the purchase, your credit limit will be debited with the total amount of purchase, whereas the amount of EMI will be billed each month. The EMI will be added in the minimum payment due which has to be paid by you.

Conversion of transactions into EMI

Credit cards will give you the convenience of conversion of a transaction into EMIs. There are times where we will be using our credit card for huge transactions but are unable to make payments on time, in those times, the bank which issued credit card will give you an option for the conversion of purchases into EMI. Based on the amount of transaction, you will be able to select to make the payments over a time period. The option of credit card EMI will help you to take advantage of the option of EMI at attractive rates of interest. As a user of credit card, you will not be required to worry above swiping your credit card over the limits of spending.

Conversion of purchases into EMIs

Adding to this, the conversion of EMI will help you to avoid the revolving rate of interest which is more than the rates of interest for the EMI. The banks will generally charge a small fee for the conversion of purchases into EMIs. For taking advantage of this particular service, your amount of purchase should be more than the minimum amount which has been set by your bank. Each bank has its own criteria of eligibility for EMIs on credit cards. You can consider converting your purchases into EMIs by getting in touch with your bank via phone, by visiting the nearest branch or net banking services. Once you sign in to your credit card account, you will see an option for EMI conversion beside your purchases which meet the minimum amount ser. By following some simple steps, you can proceed to convert the purchases in a quick manner.

Calculation of EMIs on credit card

The calculation can be performed by adding the amount which you have to pay every month with service tax and interest. Based on the bank which issued the credit card, the rate of interest will keep varying. You can select to make the payment in instalments by selecting the tenures of 6, 9, 12, 18 and 24 months. Contact your bank for obtaining particular information regarding the credit card you actually own.

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