CONVERTING CREDIT CARD DUES INTO EMIs

When faced with a high credit card bill, converting the amount into Equated Monthly Installments (EMIs) can be a viable option. This approach splits the due amount into manageable EMIs, allowing you to repay the debt over a tenure of your choice. However, before opting for this, it’s essential to weigh the benefits against the costs.

UNDERSTANDING CREDIT CARD EMIs

Credit cards are designed to provide you with purchasing power and convenience. You can make purchases and pay them off later, typically with two options: paying the full due amount or the minimum amount to avoid delay charges. However, paying only the minimum amount can result in high interest charges and negatively impact your credit score.

HOW EMI CONVERSION WORKS?

When your credit card bill is substantial, you can convert the total amount due into EMIs. This option breaks down the payment into smaller, manageable installments, which you can repay according to a tenure that suits your financial situation. This method can help ease the financial burden, but it is crucial to understand the interest implications fully.

PAY YOUR BILL IN EMIs WITH INTEREST

Opting for EMI conversion comes with the caveat of interest, which might be higher than you expect. It’s essential to assess whether you are comfortable with the additional interest charges. Avoid making a habit of converting all your purchases into EMIs to prevent accumulating excessive debt.

NO COST EMIs: A CLOSER LOOK

Many merchants offer ‘No Cost EMI’ options, allowing you to repay a significant amount in smaller installments without incurring additional charges. These tenures typically range from three to twelve months, depending on the merchant. While this option seems attractive, it’s crucial to be cautious of hidden fees and additional costs that may apply.

AVOID DEFAULT AND DELAY

Choosing to pay in EMIs reduces the likelihood of defaulting or delaying payments. You can select a tenure that aligns with your income and pay the amount with interest. However, remember that longer tenures mean extended liabilities, resulting in higher interest payments. Credit card EMI interest rates generally range from 15% to 24%, but they may sometimes be lower than the standard credit card interest rates, depending on your credit history and the bank’s terms.

NO DOCUMENTATION REQUIRED

One of the advantages of converting your due amount into EMIs is the simplicity of the process. Banks and merchants typically offer this option without requiring extensive documentation, making it easy to opt for EMI conversion at the time of purchase.

MANAGING FINANCIAL EMERGENCIES

Experts recommend keeping your credit card utilization below 30% to maintain a healthy credit score. However, emergencies such as medical expenses, education, or weddings may necessitate higher spending. In such cases, using your credit card responsibly and repaying the dues promptly is crucial to avoid interest and maintain a good credit score.

UNDERSTAND YOUR CREDIT LIMIT

When you opt to pay via EMIs, your credit limit is blocked for the entire amount. It will only increase as you repay the installments. Keep a close watch on your credit limit and avoid making multiple high-value purchases until you clear your existing dues.

IMPACT ON YOUR CREDIT SCORE

Exhausting your entire credit limit can significantly impact your credit score. Conversely, timely payments can boost your score. Paying before the due date is one of the best ways to enhance your credit score and maintain a healthy credit history.

KEY TAKEAWAYS

• Interest Rates: Credit card EMIs typically attract higher interest rates, ranging from 15% to 24%.
• Selective Use: Avoid converting all your purchases into EMIs to prevent falling into a debt trap.
• Credit Limit Management: Even with EMI conversion, your credit limit remains blocked for the total amount. It increases only as you clear your dues.

Credit cards are invaluable tools for managing payments and spending without constraints. However, it’s essential to use your credit card responsibly to avoid falling into debt and maintain a strong credit profile.