2 weeks Ago By Personal Finance Desk
Credit cards have become instrumental in big-ticket purchases and any unplanned spending. Many credit card issuers offer the facility to convert large amounts into equated monthly instalments. This feature helps credit card users to pay the amount in small parts over a specific period without any financial burden.
By turning big credit card purchases into EMIs, you can avoid depleting your savings at one go. This can also help to avoid the fees for failing to pay a large amount. The EMI facility offered by card issuers could be convenient, but it may come with additional fees and interest rates.
This will increase your overall financial burden for large purchases.If you do not pay attention to certain factors, choosing the EMIs can impact your savings in the long run. Any default in the payment of the EMIs may lead to a reduction in your credit score.
By focusing on some basic things before converting your credit card bills into the EMIs, you may be able to maximise your benefits.Key Factors To Consider Processing fees: Most merchants offer EMI payments for big purchases like gadgets and furniture. However, there can be a one-time processing fee in many cases.
This can affect your overall payment. Read the terms and conditions of the EMI facility carefully to understand any hidden charges.Interest rate and tenure: Just like you might browse to find the perfect phone or outfit for yourself, you need to shop around for different tenures and interest rates if you have multiple credit cards.
Banks often charge lower interest on long-term EMIs, but you could end up paying more over the tenure. Similarly, looking at different interest rates for the same tenure could help you save money.Pre-closure charges: Happy to pay off your EMIs before time? This may cause you to reconsider.
Many financial institutions have pre-closure charges for early repayment. This can cause you to shell out more money.Credit score: Before converting your credit card bills into EMIs, do consider the impact on your credit score.
Switching your bills to the EMI may raise your credit utilisation ratio or ratio of debt to available credit significantly. A CUR of more than 30% is bad in terms of credit score. If your credit score goes down significantly due to the EMI payments, you will have difficulty in getting loans or new credit cards in the future.
Reward points: Many merchants offer discounts or reward points, which might be lost if you convert your purchases into EMIs. In this case, it can be a better idea to save enough for any big-ticket spending rather than to go for EMIs.Credit Card Defaults Rise 28% in 2024, Surpass Rs 6,700 Crore: RBI DataRemember, that timely payments are a must if you convert credit card bills into EMIs.
This requires careful budgeting. A default or delay in payments will affect your credit score negatively. Your future expenses will also be impacted if you change credit card purchases into EMIs.
The purchase amount will be blocked on the card, lowering your credit limit till the payments are completed. In order to manage your budget and maximise your savings, carefully consider these factors before deciding on whether to change your credit card purchases into EMIs. Want To Own Multiple Credit Cards? Check Five Key Factors Before Applying.
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