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Credit card EMIs: Things to keep in mind while opting for it

Credit card usage and spends is rising is India. As per data by the Reserve Bank of India (RBI), there were nearly 77 million credit cards outstanding in India in May 2022, which is a big leap of 23% over May 2021.

Credit card EMIs ease the financial burden, as one can read the dues in installments over a period of time instead of paying the full amount upfront. One can make a high-priced purchase without burning a hole in your pocket. While this is a convenient option, there are a few things one should keep in mind when opting for it:

Compare fee and charges associated with it:

Credit cards equated monthly installment (EMIs) are often subject to certain charges, such as the interest rate, processing fee, prepayment or foreclosure charges, etc.

Processing fee is a one-time charge that can range in from 0-3 per cent of the amount. Foreclosure ore prepayment charges are applicable when one wishes to close EMIs before the loan duration. Interest is also applicable on EMIs and varies across card issuers. With no-costEMIs, these charges can be waived off or adjusted, which can make the total EMI equal to the product’s price.

If one has multiple cards, then compare rates across all the cards and choose wisely.

Choosing the right tenure:

Generally credit card issuers offer a lower interest rate on a longer tenure. However, before opting for a longer tenure, first calculate the total amount of interest one will end up paying over that period.

Credit limit:

When opting for credit card EMIs, the total transaction amount is deducted from credit limit. Though as one services the EMIs, the amount gets added to available limit, but the available credit limit is significantly lowered at the time of purchase, which means you will have a lower credit limit for future purchases.

Though EMIs are one of the most attractive features of a credit card, but keep in mind the factors mentioned. Always ensure that that the spending is within limits, in order to pay bills on time and avoid the hefty finance charges and penalties that can lead to a debt spiral

EMIs are one of the most attractive features of a credit card. But beware: always ensure that you spend within limits, so that you are able to pay your bills on time and avoid the hefty finance charges and penalties that can lead to a debt spiral

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