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Is It Wise to Convert Your Credit Card Transactions into EMI For payment?
Posted on Friday, September 9th, 2022 | By IndusInd Bank
Big-ticket purchases can easily burn a hole in your pocket and interfere with your financial planning. While you can always pay for big-ticket purchases using your savings, it is best to use a credit card for expensive purchases. The reason is you can easily convert your credit card transactions into EMIs which will be easy on your pocket and will also ensure that you don’t need to dig into your savings. When you opt for an EMI, you don’t have to pay a large credit card bill after a big purchase. You can instead split the transaction amount into several monthly instalments and pay off the debt comfortably. This reduces the financial burden.
But should you convert your credit card bills to EMIs? Let us weigh some pros and cons to find out.
Benefits
Here are some benefits of converting transactions done through credit cards into EMIs.
1. Easier Repayment
Converting your credit transactions into an EMI allows you to make big purchases without overburdening yourselves. It also makes repaying the debt convenient as EMIs are easier to repay than a one-time bill payment. Naturally, you eliminate the risk of making late payments and bearing penalties too.
2. Attractive Interest Rates
The interest rates on EMI payments are much lower than regular credit card interest rates. This makes EMI payments manageable. But that’s not all. Some of the best credit cards come with the option of zero-cost EMI for certain products. This means even lower EMIs since you only pay for the product price.
3. Flexible Repayment Tenure
You can choose the repayment period for credit card transactions at your convenience. For instance, if you made a large transaction, you can choose a longer repayment tenure so that your monthly EMIs become smaller.
Note that banks allow tenures of 6 months to 24 months. But longer repayment tenures typically mean you pay a larger sum towards interest.
4. Improve Credit History
Strong credit history is essential if you want to avail of credit facilities. You minimize the risks of defaults by converting big purchases into EMIs. So, with each monthly payment you make, your credit history improves.
Drawbacks
Here are some cons that you must consider before opting for conversion.
1. Additional Fees
Most banks levy additional charges such as processing fees, GST, and prepayment charges. Even if the interest payments are low, you may pay more in additional charges. That said, you can review the additional charges applied by each bank before getting a credit card.
2. Blocked Credit Limit
Once you convert your purchase through credit cards into EMI, banks block a certain amount on your credit limit. So, you get a lower credit limit for every new transaction until you repay the amount in full.
3. Lower Refund Amount
If for some reason, you return the purchased item after the bank has processed EMI, you will not receive the refund amount in full. Banks usually deduct processing charges, tax, and prepayment charges from the loan amount before refunding.
Verdict
The ability to convert transactions into EMI is a convenient option if you use credit cards, and it is ideal for making big-ticket purchases without constraining your finances. However, you must consider the drawbacks of converting your transactions into instalments.
Disclaimer: The information provided in this article is generic in nature and for informational purposes only. It is not a substitute for specific advice in your own circumstances. Hence, you are advised to consult your financial advisor before making any financial decision. IndusInd Bank Limited (IBL) does not influence the views of the author in any way. IBL and the author shall not be responsible for any direct/indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information.
