NEW DELHI: Credit card users often find themselves unable to repay their bills before the due date. In such cases, credit card issuers sometimes allow users to convert their entire bill or a part of it into equated monthly instalments (EMIs) at a lower interest cost and for a comfortable tenure.
This facility can also be availed by those without immediate repayment capacity for making large credit card spends. While the EMI conversion facility may seem a win-win proposition for both card users and their issuers, credit card holders should consider these four factors to make an optimal choice:
Conversion of outstanding credit card bill or part of it
This option allows credit card users to convert their entire credit card bill or a part of it into EMIs. Sahil Arora, senior director, Paisabazaar.com said, “This will save them from incurring hefty finance charges, as well as, late payment fee levied on unpaid credit bills. They can repay the unpayable portion of credit card bill in smaller tranches through EMIs as per their repayment capacity.”
Conversion of select transactions
This option allows card users to convert transactions beyond a pre-specified threshold amount set by the card issuers into EMIs. Exercising this option can be beneficial for those who wish to convert only specific card transaction(s), especially the big-ticket ones, into EMIs.
Credit card balance transfer on EMI
Many credit card issuers offer the facility of EMI conversion on credit card balance transfer. This option allows you to transfer the outstanding credit balance of a credit card to another credit card issued by a different card issuer and then convert the transferred balance into EMIs.
“This balance transfer facility can be helpful for card users whose existing card issuer(s) either refuse the EMI conversion facility or charge a higher interest rate for the same,” said Arora.
Points to note
The interest rate levied on credit card EMI conversions are significantly lower than hefty finance charges of around 23%-49% p.a. levied on outstanding credit card dues. However, the interest rate charged for EMI conversions tends to vary widely depending on the credit card and the card holder’s credit profile, past repayment behaviour, and transaction pattern.
Arora said, “If you have multiple credit cards and you plan to make some credit card transactions that would be later converted into EMIs, make sure you compare the interest rate levied on EMI conversions by existing card issuers and accordingly make transactions. Keep in mind that credit card issuers may also levy processing fees for the EMI conversions.”
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