Introduction
Are you a compulsive shopper who can’t resist the urge to purchase items even when you don’t have the money to pay for them outright and don’t mind using the EMI on credit card option to spread out the payment without fully understanding how it all works? If the answer is yes, you are firmly ensnared in the EMI cycle for credit cards.
There are three ways to make credit card payments; the simplest and most practical is to pay off the entire balance before the due date without paying interest on it. The second method of paying the remaining balance is to pay a portion of it now and carry the remainder over time by accruing interest. The third alternative is to pay off the entire balance and divide it into equal monthly installments for credit cards, much like you would do with a personal loan or mortgage. Before agreeing to such an obligation, the first and most crucial thing you need to comprehend is how the entire credit card EMI process functions.
How Does A Credit Card EMI Works
In an emergency, credit cards can be a terrific financial tool, but they can also cause you to be irresponsible. With credit cards, you could have a tendency to spend more than you have and get into a debt trap. However, EMIs from credit cards can come in quite handy in this circumstance. Now, typically, when you make a purchase using a credit card, you are given an interest-free period of 40–55 days within which you must reimburse the amount with which you had made the purchases. If payback is made within this time frame, no interest will be imposed on such purchases. However, not everyone is always able to pay back the full sum within this time span.
Therefore, the bank provides you with a programme where you can turn your purchase amount into EMIs, making it simpler for you to pay back the debt. These banks collaborate with a retailer to offer you these EMI plans, but in order to take advantage of them, you must use your credit card to make a minimum purchase of the amount specified by the bank. When completing the payment, you can select the EMI Scheme and decide how many payments you want to use to pay back the purchase price: 3, 6, 12, 24, or 36 months. However, it’s vital to keep in mind that the amount for which you made the transaction will be deducted from your credit card limit. The principle amount will be deducted from the cap, not the total amount (which includes interest as well). Depending on the number of months you select, the total amount (principal plus interest) is then divided into equal monthly payments.
Calculating EMI On Credit Card Bill
- The record of interest rate and the processing fee, which are decided by the bank, can be used to compute the EMI on a credit card bill.
- After the consumer makes a down payment, the remaining amount is often multiplied by the interest rate, the term, and any charges or processing costs that are determined by the bank to arrive at the EMI. You can use the EMI calculator on the bank’s official website and enter the purchase price, the interest rate, and the repayment period to determine the EMI before choosing the option.
Conclusion
Although credit card EMIs are practical, it’s vital to remember that not all credit card issuers provide this service for all cards. Additionally, your credit limit decreases according to the principle amount each time you choose an EMI. It’s crucial to keep in mind that the majority of credit card EMI services feature a “delayed payment penalty” condition that needs to be properly understood. Debt from credit cards is dangerous and costly. It is always preferable to pay on time to avoid any difficulty.
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I am an Undergraduate Student pursuing BA English Hons in KIIT University. My hometown is in Cuttack, Odisha. My hobbies include dancing and singing.