Advantages of Converting Your Credit Card to EMI

Numerous benefits are offered by credit cards, such as free shipping and financing with 0% interest, but earning rewards may be the most valuable perk. Rewards credit cards are available in a wide range of designs and sizes, offering cash back, points, or miles that can be redeemed for a variety of things, including statement credits, travel, gift cards, and more. However, if you do certain things, like carrying a balance, you could cancel any benefits you receive.

How does an EMI on a credit card work?

The way that credit card EMIs work is similar to how they work for other types of debt. The client is required to pay a specific debt balance over a specific period. In this instance, the EMI is calculated based on the interest fees levied by the bank, the customer's selected tenure, and the customer's down payment. For instance, if a customer buys something for Rs. 20,000 and pays Rs. 10,000 as a down payment, the remaining amount can be paid by the consumer in yearly installments of Rs. 1,200.

How are credit card payments converted to EMIs?

●       The customer has the choice to make EMI payments for their credit card balances at the time of purchase. Credit card payments can be changed to EMIs if you believe you will not have the money or will only have a portion of the money at the time of purchase. The customer may use the amount that can be paid as a down payment.

●       When using credit cards, retailers influence consumers to choose the EMI option. When making payments, the EMI option is more practical for the customer and the interest rate is applied based on your card's bill and monthly statement.

●       It is necessary for the bank providing the credit card to determine that the customer is qualified before allowing them to use the EMI option.

●       Before the EMI option is approved, a variety of factors including your credit score, spending patterns, monthly expenses, and repayment plans, are examined.

Different types of EMIs on credit cards

There are different types of EMIs and they are as follows:

EMI with lower interest rates:

Your access to these EMIs comes with a lower interest rate than the penalty for late payments. It's like getting your outstanding credit card bill converted into an EMI at a discounted rate for which the bank will charge you a processing fee.

No cost EMI:

This kind of EMI plan only requires that you pay the product's price in EMIs. On this type of plan, there is no interest charge. According to the RBI, loans cannot be provided interest-free, you are given an upfront discount that is similar to the total interest for that period

Benefits of EMIs on credit cards

Although paying off your credit card balance in full each month is always a good idea, if the balance is too high to pay off in one go, you can always break it up into EMIs. The benefits of credit card EMIs are as follows:

No permission is required

To use this facility you don’t require the bank's prior approval. All you need to do is check to find out if this feature is offered on your credit card or not. If it is possible, you can ask your respective bank to turn your unpaid debts into EMIs so that you can start making your installment payments on time. You don't need approval, even though it's necessary for other loan types like personal and home loans.

Improves your credit score

Your bill will be split into equal installments with EMI, making it much simpler to pay than if you were to make one large payment. Failure to make the full payment on time will result in late payment fees and a decrease in your credit rating. Your credit score will rise if you have EMIs enabled on your credit card because you will feel more confident about making on-time installment payments.

Easy Debt payment

If a person has a credit card in his pocket, his purchasing power is increased. However, if not used properly, it can also lead to debt traps. However, there are times when the amount is so large that you cannot pay it in full, which results in the amount continuing to accumulate interest. This is the point at which EMI is created. If you don't have enough cash on hand to pay off your credit card debt in full, you can always choose to divide the balance into equal monthly installments for three to six years. By doing this, the burden of paying the entire amount at once is spread out over several months, saving you money on interest and late payment fees.

Exclusive deals

Merchants work in partnership with credit card companies to offer you special deals on items you can buy with credit cards on EMI. This offer covers a wide range of goods, including watches, cell phones, and other items.

Affordability

Credit card EMIs are a primary factor in the affordability of transaction payments. To avoid breaking your budget, you can easily make a large purchase and split it into EMIs. Similar to how the EMI facility aids in breaking down large credit card bills into manageable installments so you can pay them off quickly. Thus, credit cards are now more affordable and practical for shopping thanks to the EMI facility.

Processing charges

When switching credit card bills to the EMI option, some banks don't charge any fees. Utilizing the EMI option is wise in such circumstances. Occasionally, lenders will waive their processing fees during holidays or busy seasons. Making the most of this chance should be a customer's goal.

How to use EMIs to pay your credit card bill.

When you convert credit card debt into EMIs, your credit card bill is split up into manageable installments that can be paid back for one, two, three, or more months, depending on your preference. You must make a monthly payment on the smaller portion (also known as the EMI) until the entire credit card balance is paid, which includes both the principal balance and an interest component. In addition, the bank or card company temporarily reduces/blocks the credit limit by equal to the bill amount converted into EMIs. When you start making EMI payments, the bank gradually raises the credit card limit by the amount of each EMI that has been made.

How to Calculate the EMI on a Credit Card Bill

●       Using the bank's recorded interest rate and processing fee, one can calculate the EMI on a credit card bill.

●       After the customer makes a down payment, the remaining amount is typically multiplied by the interest rate, the term, and any charges or processing fees that are determined by the bank to arrive at the EMI.

You can use the EMI calculator on the bank's official website and enter the purchase price, the interest rate, and the repayment period to determine the EMI before choosing the option.

Conclusion

Credit cards are excellent financial instruments that help us postpone making payments on purchases. However, it is essential to use them wisely. Consider turning your credit card bills into EMIs if you are unable to pay them off on time or before the due date. The conversion of an unpaid bill into an EMI usually happens instantly, but the processing time for the latter can sometimes take a few days. A portion of your credit limit will be temporarily blocked while you make an EMI purchase. This blockage will be lifted as soon as you begin making installment payments. Now, if you have a sizable amount of debt that is owed to you and you are unable to pay it back, you should convert the debt into EMIs and begin making regular payments to escape the vicious debt cycle that will further harm your credit score.

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