A Rs 50,000 credit card bill can feel easier to manage when converted into monthly EMIs. However, as a borrower you need to understand that this convenience comes at an additional cost.
If you have enough savings and can comfortably pay the full amount without disturbing your emergency fund, this might be a wiser option. By doing so, you avoid paying any additional interest. Credit card EMI, which allows you to transform your purchase into small monthly payments, appears convenient but comes with a high interest rate. In India, this rate can vary between 12-24%.
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If paying the entire amount, however, strains your monthly budget, converting the outstanding balance into EMI may make repayment more manageable.
Before converting your transaction into EMI, here is what you should consider:
- Interest rate: Check the EMI interest rate offered by your card issuer and compare it with the cost of carrying the outstanding balance.
- Processing fee: Some banks charge a one-time fee for converting dues into EMI.
- Tenure: A longer tenure reduces the monthly EMI but increases the total interest paid.
- Prepayment charges: Check whether you can close the EMI early and whether any foreclosure fee applies.
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Here's What Your Card EMI Might Be:
For a Rs 50,000 balance at 14% annual interest, the approximate EMIs for 6 months would be:
Transaction: Rs 50,000
Interest: 14%
Time: 6 months
EMI Amount: Rs 8,677
Total Interest Amount: Rs 2,061
Total Payable Amount: Rs 52,061
This means that you will end up paying an additional Rs 2,061 amount on your purchase. Over a shorter term, this may not be too expensive, but if you decide to spread your EMIs over a longer duration, the overall amount can be significant.
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