Credit Card EMI Explained: How To Use, Pros And Cons
The EMI facility offers the convenience of breaking down large payments into smaller, manageable instalments.
Credit card EMIs (Equated Monthly Instalments) have transformed the shopping experience, particularly for online purchases. They have become a popular option to manage large expenses with minimal immediate financial burden.
The EMI facility offers the convenience of breaking down large payments into smaller, manageable instalments. The flexibility to choose the EMI tenure also helps credit card users decide on a monthly repayment amount as per their financial position.
However, the credit card EMI facility comes with its own set of advantages and drawbacks. Here’s a look at how credit card EMI works and its advantages and disadvantages.
What Is Credit Card EMI And How To Use It?
A credit card EMI lets you split a large expenditure on your credit card into smaller, fixed monthly repayments spread over a pre-determined duration. Instead of paying the entire amount upfront, you commit to monthly payments comprising both the principal and interest, if applicable.
Many online and offline merchants let you select the EMI option during checkout. You can choose the tenure and see the breakdown of monthly payments before you confirm the transaction. You must pay the EMI as part of your credit card bill each month to avoid penalties.
Advantages Of Credit Card EMIs
Affordability: A credit card EMI spreads the cost of expensive purchases over a specified period of time. This makes it easier to maintain expenses within your budget.
Convenience: EMI options are available across several online and offline stores. Further, you can choose a repayment tenure that suits you best.
No-Cost EMI: Many merchants and banks offer no-cost EMI. With this option, you don’t pay extra interest.
Rewards and Cashback: Some banks offer reward points, cashback, or discounts on EMI transactions.
Disadvantages Of Credit Card EMIs
Interest Costs: EMI payments usually come with interest rates, which can significantly increase the total cost of your purchase.
Impact On Credit Limit: The EMI amount reduces available credit limit until the loan is fully repaid. This restricts the number of transactions you can make with the card.
Hidden And Additional Charges: Some EMI options include processing fees, GST, or prepayment charges. Sometimes, these may not be clearly disclosed upfront.
Risk Of Overspending: The ability to make EMI payments can tempt you to make impulsive purchases. It can lead to debt accumulation in the long run if the dues are not cleared within the pre-determined tenure.
To conclude, credit card EMI offers the flexibility to afford high-value purchases without making a large dent in your pocket. However, be sure to understand the terms and conditions properly before you opt for credit card EMI.
