Personal Finance and Attractive Interest Rates Unlock Smart Savings with Low Rates and Expert Financial Tips
Related Articles
One of the best things about credit cards is the interest-only mode. Who likes having some financial flexibility, especially when making large purchases? Although paying for your ambitions in installments is flexible, you should be aware of several possible risks of credit card EMI. Here are the information on when to use credit cards and when to avoid:
When to use Credit Card EMI
The instances listed below are typical ones in which choosing credit card EMI can be wise:
- Cost-effective option:
If you need to make a large purchase and need more money, installment payments might help make it more reasonable. It is crucial to consider any associated fees before making such a transaction. Purchasing a product on an extended payment plan may be a wise choice if the interest rate is reasonable.
- If you choose to keep your cash balance:
You can decide not to spend all your money, even if you can afford to pay for goods upfront. Purchasing the product on an installment plan will let you keep your cash balance for unexpected expenses.
When to avoid credit card EMI:
- There are exorbitant interest fees:
Not every product may offer a free EMI. Regarding normal EMIs, interest costs can increase if you take them out for a lengthy time or if the bank offering them charges exorbitant interest rates. In these circumstances, choosing a credit card EMI might not be the best action.
- To prevent expenditures:
While interest-only payments on credit cards let you pay for large purchases over time, they can also cause overspending. Repaying your EMIs on time may be harder if you have too many or the sum is too big. EMIs must be paid on time every month, or failure could harm the credit profile.
Advantages of credit card EMI:
Credit card EMI conversions are affordable because they spread the expense over several months, making significant purchases more manageable in terms of cash flow and financial planning.
- Cut interest rates:
EMI choices often have lower interest rates than revolving credit, the conventional method by which credit cards charge interest on outstanding amounts.
- No need for additional loans:
You can use your credit card EMI feature to fund purchases without applying for a personal loan, expediting and simplifying the procedure.
- Flexibility:
Most institutions offer various tenure options, so you can select a payback time that best suits your budget.
- Special Offers:
During special sales events or for particular products, credit card issuers frequently collaborate with retailers to provide promotional interest rates or even interest-free extended mortgages.
Considerations before selecting EMI on a credit card:
The following are some crucial factors to take into account if you decide to use credit card EMI:
- Examine promotions on various platforms and shops:
Examine the terms and conditions of the offers on different websites and retail outlets to see if the product is eligible for an extended warranty, especially if there is a free EMI option.
You may view the costs and deals on all well-known sites, even if you conduct an online search for the product. It is advisable to always purchase from reputable platforms, even if the cost is marginally more than on unfamiliar ones.
- Check your credit limit:
The full amount you pay on credit card EMI will automatically reduce your card’s credit limit when you make the purchase. Therefore, make sure you have sufficient credit available before purchasing. You should always have an accessible credit limit greater than Rs. 50,000 to avoid affecting your credit utilization ratio.
- Select the ideal repayment duration:
Although selecting a longer payback period could be alluring, it results in higher interest rates. However, picking a very short duration can raise your monthly EMI payment.
Usually, free EMIs are only offered for six months. Therefore, it is wise to weigh the advantages and disadvantages before deciding on a payback period.
Types of EMI options:
- Merchant EMI:
Merchant EMI is available at the point of sale, both online and in physical stores, where the merchant and the bank have an agreement in place for the merchant to offer EMI choices.
- Bank EMI:
Using the app provided by your bank, you can convert a transaction into EMI after making a purchase.
- No-cost EMI:
Under this arrangement, the bank or merchant bears the interest expense, rendering the consumer’s EMI interest-free. However, this could also entail extra fees that need to be disclosed in the pricing or a reduction in the product’s cost.
Winding it up:
Credit card EMI is useful when big expenditures are broken into manageable amounts. However, knowing the conditions and charges involved is important before making this choice. Using credit card EMI will help you make major purchases more manageable without breaking the bank by informing you about interest rates, fees, and payback conditions.
