What is Credit Card EMI & How Does it Work?

• EMI on credit cards make high-value purchases more affordable and accessible, without impacting your regular budget.
• Consider the related charges, including interest and processing fees before opting for the EMI facility.
• You should pay every credit card EMI in full and on time to maintain a good credit score.

Credit cards offer a host of different benefits and discounts, while also providing you the flexibility to make purchases first and repay the card issuer later. What's more, you can use the EMI (Equated Monthly Instalment) facility and repay at your convenience.EMI on credit cards allows you to pay the requisite amount in instalments rather than the entire amount in one go. However, your credit card EMI depends on various factors, including transaction value and interest.In this blog, you'll learn how EMI on credit cards works, among other essential details.

Some credit cards offer an EMI facility through which you can split a specific repayment amount into smaller affordable instalments. This, in turn, makes high-priced items within your means and helps you manage your expenses efficiently.Simply put, EMI on credit cards makes high-value purchases accessible in a budget-friendly manner.

It is usually a good idea to use the EMI facility for high-end purchases or to settle overspending. Here’s why:

• High-End Buying: EMI on credit cards can help you make certain purchases which are usually expensive and may exceed your budget.
• Be it a laptop for your business or personal use, a smartphone with advanced features, or a designer suit for an important function, you can get these on EMI with your credit card.
• Settle Overspending: Budgets typically get affected during festivities or urgent/unplanned purchases, resulting in overspending.

However, thanks to the EMI facility, you can take care of the amount overspent by repaying it in instalments over a specified time. You may talk to your card issuer for information on the related terms and conditions. Also Read: Explaining EMI: Meaning, Formula, Components, and More

EMI on credit cards offers several benefits that can streamline your overall financial management. Here are the key benefits of availing the EMI option:

• Efficient Money Management: Paying the entire purchase amount upfront may cause a financial burden and budget deficiency in turn. However, with the EMI facility, you can pay in instalments and manage money efficiently.
• Postponement of Payment : You can postpone your payments legally by opting for the EMI option. It gives you the flexibility to repay the amount at your convenience and affordability over time.
• Lower Interest Rates: EMI on credit cards generally attract interest which is usually lower than the credit card interest rates.

Here are a few things that you should keep in mind before opting for the EMI facility:

• Availability of the EMI Facility: You should know that not all credit cards offer the EMI facility. Also, the EMI facility is usually applicable on certain purchases. Thus, it is essential to check whether the EMI facility is available on your credit card.
• Processing Fees: Certain financial institutions levy a processing fee for converting the requisite amount into EMI. Check the fee amount with your financial institution and if the same can be waived off.
• Repayment Terms: Gain clarity on the repayment terms i.e. the interest amount and overall tenure. Also, remember to check the applicability of prepayment charges in case of early repayments. It is worth noting that some financial institutions offer interest-free EMIs when you buy specific products from certain retailers.

While EMI on credit cards makes expensive purchases accessible and affordable, it temporarily reduces your credit limit and may impact your credit score. Here’s how:

• Reduced Credit Limit: Once you purchase through EMI on credit cards, your credit limit gets temporarily reduced by the amount converted into EMIs. The limit increases as and when you pay the EMIs.
• EMI Repayment: Failure to pay EMIs on time attracts penalties. This in turn can harm your credit score. Thus, remember to pay all your EMIs without any delays.

Also Read: Check Your CIBIL Score for Personal Loan in 3 Easy Steps

You can decide if EMI on credit cards is beneficial for you by considering the following factors:

• Type of Flexibility Needed: Account for the period for which you need the EMI facility and determine if it makes sense to avail of the EMI option, especially in case of shorter periods.
• Associated Charges: Consider all associated charges, including interest and processing fees, before determining the need for the EMI facility.
• Alternatives: Depending on the purchase value, you can look for alternatives like an instant personal loan . A cost-benefit analysis on a comparative basis should be helpful to choose the most appropriate option.

EMI on credit cards can help manage purchases of sizeable amounts without affecting your regular budget. However, always repay the EMIs in full and on time to safeguard your credit score and maintain a strong credit history.Apart from building a strong credit history over time, credit cards simplify expense management and make everyday spending more rewarding. Aditya Birla Capital offers a range of co-branded credit cards that keep pace with your ambitions. Explore these benefits yourself. Apply for a credit card today. Also Read: 3 Different Types of Credit Cards