Big ticket purchases always qualify for deep planning and execution. Be it the purchase of smartphones, or laptops or meeting a medical emergency it can have a hole in your credit card bills.
Hence financial institutions have come up with the option of converting certain credit card transactions into EMI for payment. The transaction when converted is spread across a specific tenure with interest and other charges. Instead of paying as a big credit card bill at the end of the month, you can choose to extend it as multiple small payments.
Credit card transactions that can be converted into EMI
Mostly Celebrity all credit card transactions can be converted into EMI. It is also lender specific. Financial institutions may have different policies regarding the transactions that can be converted into EMI.
Before trying to convert into EMI, contact your credit card customer care and understand what are all the inclusions and exclusions for conversion into EMI.
Generally, people prefer buying smartphones, laptops, mobile phones, computer accessories, two-wheelers, furniture, kitchen appliances, medical bills, etc through credit card EMI
Credit card transactions that cannot be converted into EMI
- Gold and jewelry cannot be purchased through a credit card EMI as per RBI directives. This was done to prohibit excessive retail consumption of gold.
- Fuel bills and cash transactions cannot be covered under credit card EMI.
- Each bank has a different procedure regarding the time limit for converting a credit card transaction into EMI. For example, HDFC bank does not allow credit card transactions that have crossed 60 days.
How to convert the credit card transaction to EMI?
Merchants – during purchase:
- The merchant outlets offer to convert your credit card purchase into EMI with no cost EMI as part of lucrative offers.
- You will have to inform the merchant that you want to purchase as an EMI through your credit card. The merchant may require your credit card details and a document for proof of identity.
- Most e-commerce websites like amazon, and Flipkart accept credit card EMI for specified transactions. You can find the relevant details like eligibility, interest rate, tenure, and EMI for credit cards in the payment options of the merchant sites.
Lenders – Post-purchase
If you have forgotten to convert your transaction to credit card EMI, do not worry. You can call your bank’s customer care post-purchase and convert the transaction. You can also log in to your internet banking and find EMI options for your credit card. Remember to do it within the time limits specified by your bank. Your lender will consider your credit limit, credit score, and payment history to assess your eligibility for credit card EMI.
Lenders – Billing
If you foresee that you will not be able to settle your credit card bill for the month, you can request your service provider to convert your credit card outstanding to EMI. This option should be exercised with caution as it can harm your credit score.
Interest, fees and charges applicable for EMI conversion
You can find the interest rates offered by various banks as sourced
| CREDIT CARD | INTEREST RATE P.A |
| Axis Bank Credit Card | 14% to 16% |
| Bank of Baroda Credit Card | 13% to 15% |
| Citibank Credit Card | 13% to 15% |
| HDFC Credit Card | 14% |
| IndusInd Credit Card | 13% to 15% |
| SBI Credit Card | 14% to 15% |
| Kotak Credit Card | 13% to 15% |
| ICICI Credit Card | 12.99% to 14.99% |
The processing fees range between Rs 99 and Rs 299.
Pros and cons of conversion
Pros:
- Your credit cards need not feel the heat of a big ticket purchase either in terms of credit utilization or during repayment. Splitting up a single big amount into multiple EMIs help in better money management and credit utilization.
- The EMI tenure is generally between 3 months and 2 years. Hence further purchases and spending through your credit card can be planned accordingly.
- Most of the lenders provide zero-cost EMI. It means there are no interest and other charges but for a shorter tenure. This is a brownie point for opting for a credit card EMI.
- You need not go through a difficult process. No documentation is required except that you have to give your credit card details to the merchant outlet. If you are converting the transaction post-purchase, you can do it online by logging into your credit card account.
Cons:
- The interest rate and processing fees for credit card EMIs are very high. Interest rate ranges between 12% and 15% and processing fees are 1% to 3%.
- It should be noted that making a single big-ticket purchase through a credit card can increase your credit utilisation ratio immediately. In the same way, when converting to EMI the credit card limit is blocked during the chosen EMI tenure.
- Most credit card providers charge a penalty for foreclosure if you want to pre-close your credit EMI before the tenure.
- Some big ticket purchases can qualify for reward points. You should weigh the advantage of making a single transaction and conversion to EMI in terms of reward points and interest charges.
Conclusion:
The affordability of big ticket purchases are increased because of the option of easy EMI conversion. The no cost EMIs are undoubtedly a big hit and help in retaining your disposable income. But any financial decision should be taken with caution.
The interest rate, processing fees, blockage of your credit limit, and impact on your credit score should be clearly analyzed. It should be compared with the metrics of purchases made as a single transaction.
The EMIs will help in breaking your big credit card payment into a manageable obligation. It also helps in saving your credit score when you are at the verge of missing your credit card payment. Whether you opt for a single payment transaction through your credit card or EMI, ensure you clear the dues as and when it is due.