Credit card payments with EMIs? Count the benefits first

When it comes to credit card, with plenty of perks available, it has become a major tool of making financial transactions on day-to-day basis. You can use credit card for making any financial transactions based on your credit limit. This product is not just about advantages and perks only, but it has some disadvantages as well. The credit card can turn out to be very expensive. Most of us take a credit card just keeping its positive sides in mind. These people hardly bother about the flip side of the credit card. You seldom thought about the fee, charges and penalties levied by the bank on late payments and other surplus charges.

In case, if you spend beyond your repayment capacity and you failed in paying the total outstanding in one go it will become difficult for you to manage the credit card debt. In such situations where you pay minimum outstanding amount and remaining amount carry forward for next months payment. Looking at your minimum payments and outstanding amount, banks charge 24% to 36% of interest on the outstanding amount. To deal and manage this increasing debt one can opt for equated monthly installments (EMI) route that comes at lower rate of interest. Let’s find out how feasible this option is of converting EMI option.

Credit card EMI payment option: Although, this appears too basic and very common. It is very important to know whether your card has an EMI facility. There are many leading banks which offer EMI facility on your credit card. Generally, these banks permit an outstanding of up to Rs. 5 lakhs for EMI facility and the rate of interest charges stands in the range of 16% to 22% on the outstanding amount.

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You should always check this with your card-issuing bank whether your credit card comes with the EMI facility. If your credit card does not offer you EMI facility in that case you can look for personal loan or balance transfer to make timely payments of your credit card dues. If you fail to make the payment on time you will face the higher rate of interest charged by the banks, which will further increase your burden.

Affect of credit card limit: If your credit card offers EMI facility to repay credit card outstanding, you have some more factors of which you have to keep in mind. When you opt for an EMI repayment option for your outstanding amount against your credit card debt, the credit card limit gets lowered to the extent of principal outstanding. The EMI can block your higher limit of spending during the months of repayment. This could be a big disadvantage if you are dependent on your credit card for making most of the financial transactions.

Processing fee: Another important thing to consider while opting the EMIs option to consider is processing fee. These banks charge one-time processing fee to initiate the EMI option. This fee is charged upfront and adds to the cost to be paid by the card holder. Generally, the fee is charged in accordance to the total amount you borrowed and capped to a pre-fixed amount. If you are a loyal customer of the bank for a long-term you can negotiate with the bank to waive off the processing fee.

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While converting your credit card debt into the EMIs, you should always consider all these above mind. Is converting the amount in EMI is really helpful? Yes, it is in case, if you are not able to pay the whole amount in a go or you don’t have surplus funds to meet the required amount. So, you can opt for EMI option on credit card debt as it will help you in maintaining your CIBIL score as well.

(Updated on: 25th August, 2016)

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