Credit Card EMIs: All you need to know about interest rate, tenure and repayments

Credit card EMIs offer a convenient way to manage big purchases. However, it is important to understand how the credit card EMI process works, types of credit card EMIs and associated processing fees and interest rates, to avoid any last minute surprises. Further, using a credit card EMI calculator can help you estimate your monthly outflows, enabling better financial planning before the fees are charged by the card issuer.

What is credit card EMI?

Credit card EMI allows cardholders to convert large purchases into monthly instalments. Instead of paying the total amount for the purchase in one go, you can spread it out over time, with the option of selecting different repayment tenures. The interest rates may vary based on the tenure of the EMI. Processing fees or additional charges may also be applied to the amount.

How do credit card EMIs work?

Here’s how the process of opting for credit card EMI works:

• On new purchases: When you make a purchase with your credit card, you can choose to convert the transaction into easy monthly instalments (EMIs). This can be done either at the time of the purchase or shortly afterwards through your bank’s customer service or using their app or website. In the case of Merchant EMI, that is when EMI is made available at the time of purchase, you see the interest rate, EMI amount and interest amount before making the purchase. If there's any discount available, you can see that upfront as well.


• Select the tenure: Choose the period over which you want to repay the EMI. Tenures usually range from 3 to 24 months depending on the credit card issuer, amount of EMI and type of EMI. The interest rate applied may vary based on the tenure selected.


• Monthly payments: Your EMI, which includes both the principal and interest, is automatically added to your credit card bill every month until the full amount is repaid.


• Option to convert the total outstanding amount into EMIs: Some card issuers may also offer to convert your total outstanding amount into EMIs, especially if you have accumulated a large bill. Banks may also offer you to convert large transactions into EMIs.

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Interest rates on credit card EMI

The interest rates for credit card EMI vary depending on the type of EMI, issuing bank and the tenure you select. Some banks may offer no-cost EMIs on certain products when purchased from specific merchants. In the case of no-cost EMI, the bank continues to charge interest, however, the merchant offers an upfront discount to the customer which is equal to the interest applicable, making it a cost-effective option. Banks also typically charge an EMI conversion fee in such cases.

How to use a credit card EMI calculator?

Before opting for EMIs, you should calculate your monthly payments and assess whether they fit into your budget. The credit card EMI calculator is a handy tool that helps you estimate your EMI payments based on factors like loan amount, interest rate and tenure. Here’s how to use it:

1. To begin, enter the amount you want to pay in instalments.


2. Then select the interest rate provided by your credit card issuer for EMI conversions.


3. Select the period over which you want to repay the loan.

The calculator will provide you with the EMI amount and the total interest you will pay over the loan tenure.

This tool helps you plan your finances better and allows you to compare different tenure options before making a final decision.

For online shopping, when you opt for EMIs most of the e-commerce platforms give a detailed breakup of your repayment schedule. This helps to choose the right EMI tenure based on the amount you can pay every month.

Credit Card EMI vs Personal Loan

When it comes to financing large purchases, personal loans and credit card EMIs are both viable choices. But, there are a few differences to take into account:

• Interest rates: Personal loans usually have lower interest rates compared to credit card EMIs, especially if you have a good credit score.


• Convenience: Credit Card EMIs are more convenient because you don’t need to go through an approval process, and there’s no documentation required. The EMI conversion can often be done with just a phone call or a few taps on your mobile app.

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When to opt for EMIs on credit cards?

EMIs on credit cards are best suited for those who need a longer time to repay a large amount without paying a hefty upfront sum.

Here are some scenarios when you should opt for EMIs:

• Repayment period over 3 months: If you need more than three months to pay off the amount, EMIs can help spread the cost over time.


• Big-ticket purchases: Items like electronics, travel, or home appliances that might put a strain on your monthly budget can be converted into EMIs for manageable payments. This is especially true if you can avail a no-cost EMI.


• Avoiding revolving credit: Instead of letting a large purchase accumulate interest at a higher rate, converting it into EMIs ensures you will pay a lower interest rate and a fixed amount every month.

You can easily check various credit cards with EMI facilities and offers. For example, Moneycontrol allows users to access the best credit card deals from partner banks via its credit score dashboard. These offers are customised for users based on their credit profile.

Credit card EMI offers a flexible and cost-effective way to manage large purchases, especially when the interest rate is lower than your regular credit card interest rates. However, always compare the cost of other financing options, like personal loans, before making a final decision.