Credit card payments can be made in three ways.
The first option is to pay off the total principal amount prior to the due date.
The second option is to make an immediate payment of a smaller amount or the minimum amount due and pay off the remainder of the principal amount in the future. If one adopts this option, they will have to pay the interest and any other late payment charges that the bank may levy, and this amount will vary depending on the outstanding credit amount and the credit repayment tenure.
For the third option, a payment can be made by converting the amount outstanding on the credit card to an Equated Monthly Instalment or EMI. This is similar to the payment process of loans. However, before opting for an EMI, it is important for a credit card holder to be well-researched about EMIs and its process.
As an alternative of paying the high interest that is levied on the principal amount, banks offer EMIs on credit cards. Credit card EMI schemes are also issued by banks in collaboration with a merchant or a vendor. A card holder can avail transaction EMI at the point of sale (online/offline) or after a spend through online banking/phone banking.
In order to avail an EMI, a purchase must be made within the minimum and maximum amount limits set by the bank. If an individual is opting for an EMI, the credit can be paid-off in simply monthly instalments that can range over 3 months, 6 months, 9 months, 12 months or 24 months, etc. The rate of interest charged on credit card EMIs is known to vary from bank to bank. It is beneficial for a cardholder to opt for an EMI, as EMIs will offer them the luxury of paying back in a systematic manner that is suitable to their financial situation. The EMI of the purchases converted into instalments or outstanding converted into instalments are billed to customers in their following months card statements.
Credit card companies are generally known to offer low-interest rate EMI. The low-interest rate EMI is named so because the interest rate charged here is lower compared to the interest rate levied in case of delayed payment of credit card bills. The bank, offers cardholder the option to make payments distributed across a time period at a relatively lower interest rate.
– Interest rates that range from 1.25% to 1.99% per month. E.g. If you buy a mobile phone worth INR 24,000 using the low-interest EMI option at 1.25% per month, then you would have to pay about INR 2,097 every month for a year. The additional INR 97 being the interest charged by the credit card company.
This being said, the interest rates charged in EMI on credit card schemes are still significantly lower than those charged on unpaid credit card bills. However, it is important to note that a processing fee will be charged by the bank for converting purchases and outstanding balance into EMIs. Standard Chartered EMI on credit cards is a superior proposition because of a flat 1% processing fee for converting purchases in to EMI and zero pre-closire charges incase one decides to clear the entire amount before the end of tenure.
- Processing Fee:EMI schemes are subject to a one-time processing fee, charged for converting any purchase amount into EMIs. The fee is a small percentage charged for every purchase transaction that is to be converted. Standard Chartered charges as low as 1% as processing fee.
- Available Credit:In order to avail an EMI, it is important to ensure the required amount of credit is available on one’s card. If the credit available is not equal or more to the amount that is to be converted, the EMI request of the individual will be denied.
- Blocking of Credit Limit:As soon as the EMI scheme is set in motion, the bank temporarily blocks an amount that is equivalent to the value of the purchase made through the EMI scheme. The credit card limit is, therefore, reduced by the value of the outstanding principal. As the monthly instalments of the EMI scheme are paid-off, the bank begins to extend the credit limit in the amount equivalent to the value of the monthly instalments. In case the credit reduction is an issue for a card-holder, they may choose to opt for card loans which are over and above the credit card limit. In the case of card loans, the process of paying off the loan is the same as that of any other kind of loan, and it does not limit one’s expenditure. To see the Standard Chartered loan on card features, click here.
- Minimum Payment Due:While converting outstanding payments into EMI during the monthly payments, banks may ask for the EMIs to be paid as a minimum payment due every month.
It must be kept in mind that the option to convert outstanding payments into EMIs might not be made available for all purchases. Banks may offer EMI schemes on credit cards for only a certain kind of products or for a select few merchants. It is, therefore, advisable to make sure your bank offers the EMI on credit cards for the products before the purchase is made. Avail of EMI on credit cards, by choosing one here!
