Credit card users are sometimes unable to pay the entire bill on time. To give relief to such people, the bank or company issuing the credit card gives the facility to convert the entire bill or a part of them into EMI for a few months at low interest. But before doing so, all the options should be considered. Sometimes this facility also proves to be harmful. Let us understand four such major things through experts.
1- Choose the most suitable EMI conversion option for you when required
- Convert the entire bill or part thereof – This option allows you to convert the entire bill or part of the credit card bill into EMI. By doing this you will be saved from huge interest rates and late payment fees. You can pay the outstanding bills in small installments.
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- Convert Selected Transactions into EMIs – This option allows the card user to convert transactions above a certain limit into EMIs. This option can be beneficial for those who want to convert only select transactions into EMI.
- Transfer Credit Card Balance on EMI – Many banks offer EMI conversion facility on credit card balance transfer. This option allows you to transfer the outstanding bill to any other bank’s credit card and then convert it into EMI. It can be cheap.
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2- Interest rate applicable on EMI conversion –
The interest rate applicable on EMI conversion varies from 23 per cent to 49 per cent per annum, which is levied on outstanding credit card bills. However, the interest rate applicable on EMI conversion varies depending on the credit card and the credit profile of the cardholder, his payment record and transaction pattern. Processing fees may also be levied on EMI conversion.
3- Pay period for EMI conversion –
The tenure for converting select credit card transactions into EMI or credit card balance transfer on EMI is usually between 3 to 48 months, while the period for converting the entire bill to EMI can range from 3 to 60 months. Since longer tenure attracts higher interest, it is always beneficial to opt for the shortest tenure.
4 – Explore other cheap credit options as well –
If you want to convert the bill into EMI by making a large purchase with a credit card, the interest is waived from the merchant side in case of no-cast EMI from the first seller. In such a situation, the card holder does not have to pay extra despite taking EMI facility. However, GST will have to be paid on the interest.
why not just take out a loan
For large transactions, one should compare the interest rate and other costs of options like personal loan and loan against credit card balance. For a cardholder with a good credit profile, personal loan interest rates from many banks/companies are less than the EMI conversion cost.