What is credit card EMI and how does it work?

Learn how credit card EMI works, its benefits, and the process of converting transactions to EMIs for better financial flexibility.
What is credit card EMI and how does it work?
2 min read
28 July 2023

Credit cards are the best way to manage finances for big-ticket purchases. They offer convenience and flexibility. One of the key benefits that credit cards offer is the option to convert high-value purchases into Equated Monthly Instalments (EMIs), making expensive purchases more manageable.

What is credit card EMI?

Credit card EMIs provide you with the flexibility to convert your large transactions into smaller, fixed monthly payments. Instead of paying the entire amount upfront, you can choose to pay back the purchase amount in instalments over a predetermined period. The process is similar to taking a loan, with the repayment made through EMIs.

How do credit card EMIs work?

When you buy products on your credit card, you are usually required to pay the entire amount in full when in the monthly billing cycle, avoiding interest charges. However, if your credit card issuer offers the EMI option, you can opt to convert your purchase into EMI during the transaction or after the purchase within a specific period.

Here are a few factors involved with credit card EMIs

  1. Interest rates: Credit Card EMIs come with interest rates, which are determined by the credit card issuer. Some credit cards offer No-Cost EMI option as well.
  2. Tenure options: You can select the EMI tenure, which typically ranges from three months to two years, depending on your card issuer's terms. Choosing a longer tenure result in smaller monthly pay-outs, but it also means paying more interest over time.
  3. Conversion process: You can choose the EMI option at the time of making the high-value purchase. Or, you may be able to convert a recent purchase into EMI within a specified period after the transaction. You can do this online through your credit card account or by contacting the card issuer's customer service.
  4. EMI billing and payment: Once you have chosen the EMI option, the monthly instalment amount is added to your credit card statement for the selected tenure. You are required to pay the EMI amount along with the regular minimum payment due every month. Missing an EMI payment may result in penalties and negatively impact your credit score.
  5. Interest calculation: Credit card EMI interest is generally calculated on a reducing balance basis, similar to most loan types. As you make EMI payments, the outstanding principal reduces, leading to lower interest charges over time.

How to convert credit card payments to EMI?

Converting credit card payments to EMI is a straightforward process. Here's a step-by-step guide:

  1. Check eligibility: Before proceeding with the EMI conversion, ensure that your credit card offers this facility. Not all credit cards provide the EMI option, and the feasibility may also depend on the transaction amount.
  2. Choose the EMI tenure: Decide on the EMI tenure that fits with your repayment capacity. Remember that longer tenures result in smaller monthly payments but higher overall interest costs.
  3. Select the EMI option: At the time of making a high-value purchase, if the EMI option is available, choose it before completing the transaction. If you want to convert a recent purchase into EMI, visit your credit card issuer’s website or contact customer service to initiate the process.
  4. Verify terms and conditions: Carefully review the interest rate, processing fees, and other terms associated with the EMI conversion. Additionally, check if any special offers or No Cost EMI options are available.
  5. Confirm the conversion: Once you have made the selection, the EMI conversion will be confirmed, and the EMI amount will be added to your credit card bill for the chosen tenure.

Advantages of converting credit card purchases into EMIs

  1. Budget-friendly: Credit card EMIs help you buy an expensive items on easy EMIs over a long period, making it easy on your pocket.
  2. Better financial planning: The ease of paying in EMIs can help you plan new or unexpected spends as well.
  3. Allowing multiple purchases: If your credit limit allows, you can buy multiple products on EMIs. Don’t need to limit yourself to only one favourite product.

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Frequently asked questions

Can pay in EMIs with a credit card?

Yes, you can convert certain high-value transactions made with your credit card into EMIs. Many credit card providers offer this facility to their customers. But not all purchases may be eligible for EMI conversion, and the option may vary depending on the credit card issuer's terms and conditions.

How does EMI on a credit card work?

EMI on a credit card works by allowing you to convert a significant purchase into smaller, fixed monthly instalments. Instead of paying the entire amount at once, you can choose to repay the purchase amount over a specified period, usually with added interest charges. The EMI amount is added to your credit card bill each month until the tenure is completed.

Which credit card is used for EMI?

Most standard credit cards issued by banks offer the EMI facility. However, the availability of this option may vary depending on the credit card issuer and the transaction amount. Check with your credit card provider to confirm if your card allows transactions to be converted into EMIs.

How can I check my EMI balance on my credit card?

To check your EMI balance on your credit card, you can log in to your credit card account through the issuer's website or mobile app. Alternatively, you can contact the credit card issuer's customer service to inquire about your current EMI status and outstanding balance.

Is it okay to convert credit card bills into EMIs?

Converting credit card bills into EMIs can be beneficial for managing finances and making large purchases more affordable. However, it is essential to consider the interest rates, processing fees, and your financial capability to make regular EMI payments before opting for this facility.

How much is the rate of interest on credit card EMI?

The rate of interest on credit card EMIs varies depending on the credit card issuer and the terms and conditions of your credit card. In general, credit card EMI interest rates tend to be higher than other loan options, such as personal loans. Some credit cards may offer ‘No-Cost EMI’ options, where the interest component is borne by the issuer or merchant, making it interest-free for the cardholder.

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