Credit card provides you with an option to pay the outstanding amount at regular installments. Many credit card holders avail this option without understanding its pros and cons.
Credit card EMI can be opted when you have to purchase an item of the higher amount and when you are not able to make payment for the same for a complete amount within a grace period of 40-45 days.
Not all credit cards have EMI options. One should check with their respective card issuer before availing the same:
Individuals who have opted for EMI option, can pay amounts within 3 months, 6 months, 9 months, 12 months or 24 months depending on the tenure they choose.
EMI Processing Fee
Banks usually levy processing fee on facilitating the EMI option. The charge depends on the amount of purchase usually between 0.5 per cent to 1 per cent.
Banks interest rate vary between the range of 16 per cent to 22 per cent depending on the amount and tenure.
What this means is that the final value of the price is higher than the actual price of the product.
In zero EMI option, interest is not applicable. What this is means that you pay the amount in installments without paying any interest. The amount you pay on the product will be same as the actual price of the product.
Read the terms and conditions of the copy carefully, as some banks do not encourage pre-closure of the EMI. Individuals can be charged between 1-2 per cent depending on your card.
When you opt for the EMI option, the credit limit will be reduced to the extent of principal outstanding. As you pay the EMI, the limit will increase automatically.
Smart credit card holders will do their calculation before buying any products on EMI option.