Factors to consider when opting for credit card EMIs

What you really need to know about credit card EMIs.
Factors to consider when opting for credit card EMIs
3 min read
29 July 2023

Credit card EMIs offer the convenience of making significant purchases without the burden of paying the amount upfront. While credit card EMIs can offer short-term financial relief and make it more affordable, you must consider the following factors before opting for this payment method.

  1. Interest rates: Interest rates on credit card EMIs could increase the overall cost of your purchase. So, choose the EMI conversion when necessary.
  2. No-Cost EMI options: Some credit cards provide No Cost EMI options, wherein the interest component is borne by the credit card issuer or merchant, making it interest-free for the cardholder. You want to check if your credit card offers this feature and if it applies to your purchase.
  3. Processing fees: There would be a minimal processing fee involved in converting a transaction into EMI. Consider these charges while calculating the total cost by opting for an EMI facility.
  4. Impact on credit limit: Converting a purchase into EMI may tie up a portion of your credit limit until the EMI tenure is over. This can affect your ability to make other high-value purchases during that period.
  5. Prepayment options: Some card issuers allow prepayment of the EMI amount without penalties. So, if are wanting to prepay the EMI, it would be a good idea to reduce interest.
  6. Financial stability: Assess your financial stability and ability to make EMI payments consistently throughout the chosen tenure. Defaulting on EMI payments can lead to penalties, higher interest rates, and a negative impact on your credit score.
  7. Opt for suitable tenure: While it could be tempting to choose a longer tenure, the charges accumulate over the period. If you are confident of your financial standing in the near future, it is wise to choose a shorter tenure.
  8. Penalties on missed EMIs: When you miss an EMI, you are charged with a penalty. Always remember to pay your EMIs on or before the due date. Make use of the auto-debit facility to ensure timely payments.

Credit cards can be a useful financial tool when managed responsibly. However, to save yourself from debt, understand the terms and conditions, interest rates, processing fees, and other associated charges before opting for this facility.


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FAQ questions

What are credit card EMIs and how do they work?

Credit card EMIs work similar to a loan. Most cards provide an EMI conversion facility that allows you to convert the transactions into EMIs and pay them over the opted period. The EMI amount usually factors the principal amount and the interest rate on the amount.

How does opting for a credit card EMI affect my credit score?

Opting for EMIs a facility to make your life convenient. Repaying the EMIs on or before the due date, helps boost your credit score.

What factors should I consider before choosing a credit card EMI?

You must only choose EMIs if you are sure of your financial standing in the future. Below are a few listed reasons for choosing an EMI option

  • For unmanageable hefty purchases
  • When offered exclusive cash back offers or discounts on EMIs
  • For emergency purchases when you are short on cash
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