Credits cards make life simple; we walk into a store, check the products available, select the ones to buy, and swipe our cards to make the payment. There is no need to carry cash, and the entire transaction takes a few seconds. If it is a high-value purchase, we have the option of converting the amount into EMIs to pay it off without having to stretch ourselves financially.
In this article, we will understand how credit card EMIs are calculated so that you can make an informed decision as a consumer whenever you decide to swipe your card next to convert that purchase into EMIs with credit card swipe charges.
What is Credit Card EMI?
A credit card EMI is a monthly instalment you pay whenever you buy any product or service and convert the bill into EMIs. It helps consumers get access to high-value products and services without needing to use their money, and pay off the bills conveniently over time. storyretelling
However, it comes at an interest; using a credit card EMI calculator will allow you to gauge how much interest charges you will be paying over the lifecycle of the loan amount helping you decide whether you can afford the loan without hurting your finances.
How Does a Credit Card EMI Work?
Whenever you buy a product or service on credit card EMI, your credit limit on the card is reduced as per the value of the purchase.
For e.g., if you have a credit card limit of ₹1,00,000 and you buy a product worth ₹50,000 and convert it to EMIs, your overall credit limit will be reduced to ₹50,000 till you pay off the EMIs.
However, it will also impact your monthly credit card bill, with a rise in the minimum amount due every month due to the added EMIs on top of any existing outstanding amounts you need to pay off. timebusinesnews
Therefore, it is crucial you pay off the entire outstanding amount including the EMI amount every month to avoid falling into a debt trap. Credit cards work on the principle of compounding interests and paying off only the minimum amount month on month could soon inflate the bills to staggering numbers.
How is EMI on Credit Card Calculated?
Whenever you convert a bill charged to your credit card into EMIs, the interest rates can vary between 13%-18%. Therefore, you should always use a credit card EMI calculator to gauge how much you would end up paying if you went for the purchase.
Credit card interest rates are often very high and there is a processing fee attached to every conversion. It is advisable to choose a tenure that will help you pay off the EMIs without financially straining you before you purchase any goods or services.
Credit cards are beneficial tools if used wisely; however, they can also land you in a debt trap if you are not aware of the interest charges, processing fees, or any additional hidden charges on the conversion.
Therefore, always do your research before you decide to buy a product or service using your credit card, and convert the bill into EMIs so that you can pay it off without having to stretch yourself financially.