Credit Card EMI: How Does It Work?

Credit cards are the best way to make payments when you are looking to purchase any expensive items which you are unable to pay at a single shot.

Credit card provides you with an option of purchase now and make payment within 45 days or a predetermined time. If not paid during that period you will be made to pay interest or late payment charges.

Here is how a credit card EMI works?

Credit card EMI scheme allows you to pay the amount in installment along with interest within specified duration such as 3 months, 6 months, and 24 months.

Interest is not applicable where it says zero EMI option. In such cases, you pay the amount in installments without paying any interest.

Let's consider an example where Rahul and Rohan bought an I Phone 6S for Rs 50,000. While, Rahul opted to buy directly paying the complete amount and Rohan opted for EMI option.

Rahul got cash back of 5 per cent, so now the I Phone amount is Rs 47,500.

For Rohan as he is unable to pay the complete amount, he opted for the 24-month tenure to repay the amount. It charged him 1.5 per cent per month that is Rs 2,456 for 24 months. Now the I phone cost for Rohan is Rs 58,944.

Some providers also charge 0.5 per cent of the borrowed amount as processing fee for opting for the EMI option.

Using an EMI option, the amount should be paid within 3 months, 6 months, 9 months, 12 months or 24 months depending on the tenure you choose. The interest rate on Credit Card EMI scheme depends on the plan and can vary between 1.25 per cent to 2 per cent a month.