Considerations to make when choosing credit card EMIs [Updated 2023]

                                                     Credit: EbizCharge

Credit card EMIs are one of the most alluring features, but be careful not to overspend so that you can pay your bills on time and avoid the steep finance charges and penalties that can send you into debt.

In India, credit card use and spending are increasing. According to information provided by the Reserve Bank of India (RBI), there were nearly 77 million active credit cards in India in May 2022, a significant increase of 23% from May 2021.

Credit card EMIs reduce the financial burden by allowing one to pay the debt over time in instalments rather than all at once. High-priced purchases can be made without breaking the bank. Despite the fact that this is a practical choice, there are a few things to consider:

Compare the associated fee and charges:

Equivalent monthly instalments (EMIs) on credit cards are frequently subject to fees, such as interest rates, processing fees, prepayment or foreclosure fees, etc.

A processing fee is a one-time cost that can be between 0% and 3% of the total. When one wants to finish making payments on a loan before the term has expired, foreclosure or prepayment fees may be required. EMIs are also subject to interest, which varies between card issuers. With no-cost EMIs, these fees may be eliminated or modified, bringing the total EMI up to the item's cost.

If one has several cards, compare the rates for each one and make an informed decision.

Selecting the proper tenure:

Credit card companies typically offer a lower interest rate for a longer term. Calculate the total amount of interest that will be owed over the length of the loan before choosing a longer term.

Credit cap:

The entire transaction amount is deducted from the credit limit when choosing credit card EMIs. Even though the available credit limit increases as EMIs are paid in full, the available credit limit is significantly reduced at the time of purchase, meaning you will have a lower credit limit for subsequent purchases.

Although one of the most alluring aspects of a credit card is EMIs, bear the aforementioned considerations in mind. Always keep spending under control in order to make timely payments on bills and avoid costly finance charges and penalties that can cause a debt spiral.

One of a credit card's most alluring features is EMIs. However, take care to keep your spending under control so that you can pay your bills on time and avoid the steep finance charges and penalties that can send you into a debt spiral.