EMI on credit cards – Is it worth it?

By | April 16, 2014

Ajit was always fond of online shopping and therefore he applied for a credit card service. When he finally got to use a credit card, he was really surprised to see the number of benefits that a credit card offers. He didn’t really have to pay any money to buy any product up front. Instead, he could take his time to repay the sum which he had borrowed from the bank. However, due to the excessive use of credit card, he ended up accumulating a huge chunk of payments. It became nearly impossible for him to repay the amount at once. So, he then decided to go for EMI payments on credit cards. Even the popular websites like CIBIL have mentioned clearly that the customers can choose to make the credit card payments in EMIs.

Banks do come up with lucrative offers for credit card holders. Let us have a look at some of the special deals being offered by the banks in India.

Bank Special Deals
SBI Exclusive discounts on Lemon Tree Hotels, discount on travel and holiday bookings
ICICI Complimentary air tickets, Exclusive reward points
American Express Complimentary flights, welcome gifts, zero lost card liability
Citibank Discounts on Yatra, Makemytrip and bookmyshow
HDFC Gold Gym membership special discounts, Discounts on Myntra.com

As on 6th April, 2014

EMIs have become an integral part of the financial market today due to the fact that every now and then people borrow money from different institutions. Easy monthly installments or EMIs offer a simple yet flexible way to make payments to the financial institution in case of a loan or credit card. Before you choose EMIs as a method of making payments to the bank, you must carefully understand what exactly they are all about.

The common methods used for making credit card payments are:

  • Complete payment at once before the due date
  • Part payment option along with the interest on the unpaid sum
  • EMI

Out of the three methods mentioned above, EMIs are the simplest ones to comprehend with because they put fewer burdens on the credit card holder and the sum gets divided into small fragments. EMIs work on credit cards like they work on home loans, car loans or personal loans. Not all the credit cards offer you a facility of EMIs and so you should ask your bank regarding the same before you apply for credit card with the bank.

How does EMI on cards function?

Most of the credit card firms earn money by charging a heavy rate of interest on credit card payments reimbursed by the holder. Those who make late payments end up paying much more than what they should have when it was interest free. Banks are nowadays coming up with several alluring offers such as lower EMIs on credit cards and lower interest rates for repayment. As a card holder, you should never fall prey to such traps because the lucrative deals being offered by your bank are not necessarily good for the long term.

Most of the credit card providers offer two different variants of the EMIs and they are: low interest rate EMI and free zero interest rate EMI. As soon as you choose the EMI option, your credit card limit gets automatically reduced by the sum of principal which is outstanding. With every EMI payment, your debt comes down significantly. A one-time processing fee is charged from the credit card holder in case he opts for the method of EMI for making payments. In case you feel that you might end up defaulting on your payments in the near future, then you should definitely opt for the option of EMIs as it will help you in managing your debt properly.

Mitigating the risk of EMI

All the credit card companies are known to design their products in such a manner that they earn profits. A lot of banking institutions are known to offer insurance coverage on EMI so that if you’re not able to pay the amount, the insurance company will pay off all the debts. Consider if you want to mitigate the risk of EMI and invest your money in a suitable insurance coverage even if the premium is high. It could help you in keeping your credit card payments in check even in case of emergencies but do so at your own risk as it is an added payment along with your card debt and may not be ideal in your situation.

Serious introspection is required on the part of the credit card holder as far as understanding the EMI method of payment goes. Remember that if you fail to manage your debt, you’ll ruin your credit score. For better EMI deals on credit cards log on to https://www.bankbazaar.com/credit-card.html.

All information including news articles and blogs published on this website are strictly for general information purpose only. BankBazaar does not provide any warranty about the authenticity and accuracy of such information. BankBazaar will not be held responsible for any loss and/or damage that arises or is incurred by use of such information. Rates and offers as may be applicable at the time of applying for a product may vary from that mentioned above. Please visit www.bankbazaar.com for the latest rates/offers.
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Abhishek is responsible for BankBazaar.com’s Business Operations and Partner Management activities. Abhishek has a Master’s degree in Business Administration from S.P. Jain Institute of Management & Research and is a University rank holder in Engineering from Punjab Technical University. Prior to joining BankBazaar, Abhishek worked with the retail banking division of ICICI Bank and was handling diverse functions like Sales Operations, Customer Relationship Management and Cash Management, along with coordinating best practice projects like 5s,Six Sigma etc. Abhishek is also a green belt trained in 6-Sigma from KPMG and has a number of certifications from NSDL.

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