Credit Card EMIs – Meaning & How Does it Work?
Understanding how credit card EMI works is essential for anyone managing credit card debt or considering large purchases. When you can’t repay your credit card dues on time, you can break them down into smaller instalments and repay them over a certain period of time. This feature is called credit card EMI (Equated Monthly Instalments) and works well in case of big-ticket purchases or when you usually only pay the minimum balance of your credit card dues.
Through credit card EMI, you can split a big amount into small, affordable EMIs for a tenure ranging from 3-24 months. Banks usually allow credit card users to convert any amount above Rs. 10,000 into smaller instalments.
Understanding the Credit Card EMI Landscape
Before you convert a purchase into EMI, it helps to know the key factors that shape how credit card EMI works in India. Here is what you need to keep in mind:
- Interest Rates: When you choose to pay via EMI, the credit card company charges interest on the amount you owe. Generally, the longer the EMI period, the higher the interest rate.
- Tenure Options: Credit card EMIs usually offer different repayment periods, ranging from 3 months to a year or more. The longer the tenure, the smaller your monthly payments will be, but the more interest you’ll end up paying.
- Conversion Process: To convert a purchase into EMI, you typically need to request it with your card issuer, either through their website, mobile app, or by calling customer service. Once the request is processed, the purchase amount is broken down into instalments.
- EMI Billing and Payment: Each month, your credit card statement will show the EMI amount due, along with the interest. You’ll pay this along with your regular credit card payments.
- Interest Calculation: The interest on your EMI is typically calculated on the total purchase amount, not just the remaining balance. Some cards may offer zero-interest EMIs for certain purchases.
- Minimum Eligible Amount: Most banks set a minimum transaction threshold, often Rs. 10,000 or above, before allowing EMI conversion. Smaller purchases typically do not qualify.
- Credit Limit Impact: When a purchase is converted to EMI, that amount is blocked against your available credit limit until each instalment is paid. This reduces how much you can spend on your card in the interim.
How Credit Card EMI Works: Converting Payments into EMI
If you want to spread out your credit card payments into easy monthly instalments (EMIs), the process is simpler than you might think. Here’s how you can do it:
-
Check Your Eligibility
Before you start, make sure you’re eligible for the EMI conversion. Some credit card companies might have certain conditions, like a minimum amount for the transaction or a specific credit score.
-
Choose Your EMI Tenure
Next, decide how long you want to pay off the amount. The EMI tenure could range from a few months to a couple of years, depending on what suits your budget.
-
Select the EMI Option
Your credit card provider will offer different EMI options, like low-interest plans or no-cost EMIs. Pick the one that works best for you.
-
Verify Terms and Conditions
Before confirming, take a moment to go through the terms and conditions. Look out for any hidden charges or interest rates that might apply.
-
Confirm the Conversion
If everything looks good, confirm the conversion and your monthly payments will be set up. Now you can pay in instalments, making it easier to manage larger purchases without stressing your budget.
Advantages of Converting Credit Card Bills into EMI – RuPay Credit Card Benefits
The following are the credit card advantages of converting your credit card bill into EMI:
-
1. Lower interest than standard credit card charges
When you fail to pay your credit card dues in full, banks usually charge around 36%-48% interest rate per annum, which comes to 3%-4% a month. However, if you opt for credit card EMI, banks charge you 1%-1.5% a month or 12%-18% per annum, which is almost half the cost of the former.
-
2. Lesser interest cost
Banks charge interest on the loan’s outstanding balance. This is called the reducing balance method, and with a lower outstanding balance every month, your interest cost also reduces.
-
3. Flexible repayment tenure
You have an option to repay your credit card dues within 24 months. Hence, you can choose any tenure based on your budget.
-
4. No separate application is needed
Despite being a loan, you need not submit a separate application to the bank to convert your credit card bill into EMI. Hence, it is a very easy loan to obtain.
-
5. Pocket-friendly
You can split big-ticket purchases during the festive season or during certain unavoidable situations in small pocket-friendly instalments.
-
6. Better financial planning
Converting your credit card bill into EMI will help you better plan your finances. This way, you can avoid missing out on a credit card bill, affecting your credit score and leaving a bad remark on your credit history.
How to Calculate Credit Card EMI?
To calculate the EMI amount on your credit card, you need the loan amount, tenure, and interest rate. You can use the following formula to calculate credit card EMI:
EMI = P * r * (1+r)^n / [(1+r)^n – 1]
Although the calculation is quite simple, you need not calculate EMI manually. Instead, you can use a Credit Card EMI Calculator. Jupiter’s EMI calculator will help you calculate the credit card EMI within seconds.
Let’s understand how credit card EMI works using an example. You purchase a laptop worth Rs 1.5 lakhs using your credit card and pay Rs. 20,000 as a down payment. If you convert the rest of Rs. 1,30,000 into EMI to repay back in 12 instalments, and the bank charges you an interest of 14% per annum, the EMI amount will be Rs. 11,672.
When should you Consider Taking EMI on Credit Cards?
- Big ticket purchases: If you are buying an appliance or a piece of furniture for your home and can’t afford it, you can convert it into EMI and pay smaller monthly instalments.
- Exceed your monthly budget: If you exceed your monthly budget and might face difficulty during the next month, then it’s better to convert your purchase into an EMI.
How to Make UPI Payment with a Credit Card?
Making a UPI payment with your credit card is now possible through RuPay-enabled credit cards linked to a UPI ID. Here is how credit card EMI works alongside UPI for everyday transactions. You simply link your RuPay Credit Card to any UPI app, scan the QR code at checkout, and pay using your credit card’s available limit. Large UPI transactions can then be converted to EMI using your card issuer’s app or website, giving you the flexibility of a Lifetime Free Credit Card with the convenience of UPI payments. The CSB Edge+ Rupay Credit Card from Jupiter supports UPI-linked payments with added cashback benefits, making it a practical choice for day-to-day spending and larger planned purchases alike.
Factors to Consider Before Turning to Credit Card EMIs
-
Check if You’re Eligible
Not all banks allow converting credit card dues into EMIs. Confirm this feature is available before making a purchase.
-
Understand the Interest Charges
EMI conversions come with added interest costs. Longer tenures often mean paying more interest overall.
-
Account for Processing Fees
Banks often charge a processing fee that is unavoidable unless waived. Factor this into your total repayment cost.
-
Impact on Your Credit Limit
Your available credit limit will temporarily reduce by the EMI amount until the payments are completed.
-
Shop Smart for Lower Rates
Buying on EMI directly from online stores or merchants may save you money, as these typically have lower interest rates compared to bill conversions.
-
Avoid Late Payment Penalties
Missing EMI payments can lead to hefty penalties, hurt your credit score, and increase your financial burden. Ensure you can afford the monthly instalments before proceeding.
Frequently Asked Questions (FAQs)
What are the eligibility criteria for credit card EMI?
To convert your credit card purchase into EMI, you typically need to be an existing credit card holder with a good credit score (usually 750 or above). The purchase amount should typically exceed Rs. 10,000, and you must have sufficient credit limit available. Each bank has its own specific eligibility criteria, so it’s best to check with your card issuer before proceeding.
Does credit card EMI affect credit score?
Credit card EMI can impact your credit score both positively and negatively. On the positive side, timely EMI payments demonstrate responsible credit behaviour and can improve your score. However, if you miss payments or default on your EMI, it will significantly hurt your credit score. Additionally, converting a large purchase into EMI may temporarily reduce your available credit limit, which could affect your credit utilization ratio.
Are there any processing fees for credit card EMI?
Yes, most banks charge a processing fee when you convert your credit card purchase into EMI. This fee typically ranges from 0% to 2% of the total purchase amount, depending on the bank and the type of EMI offer (zero-cost EMI vs. regular EMI). Some promotional offers may waive this fee, so always check the terms and conditions before proceeding.
Does opting for EMI reduce my credit card limit?
Yes, when you convert a purchase into EMI, the EMI amount is temporarily deducted from your available credit limit. For example, if your credit limit is Rs. 2 lakhs and you convert a Rs. 1 lakh purchase into EMI, your available credit limit reduces to Rs. 1 lakh. Once you complete all EMI payments, your full credit limit is restored.
How long does it take for EMI conversion to reflect on my statement?
Typically, EMI conversion is processed within 1-3 business days after you request it. The converted amount will appear on your next credit card statement as EMI instalments. However, processing times may vary depending on your bank and the method you use to request the conversion (mobile app, website, or customer service).
How does missing an EMI payment affect my credit score?
Missing an EMI payment can severely damage your credit score. Even a single missed payment can be reported to credit bureaus and lower your CIBIL score by 50-100 points or more. Additionally, you may face late payment charges and increased interest rates on subsequent EMI payments. Persistent defaults can make it difficult for you to get loans or credit cards in the future.
Is Credit Card EMI deducted automatically?
Credit card EMI is typically not deducted automatically from your bank account. Instead, the EMI amount appears as a separate line item on your monthly credit card statement, and you need to pay it along with your regular credit card dues. However, you can set up autopay for your entire credit card bill, including EMI amounts, through Jupiter’s Credit Card Bill Payment feature. This ensures you don’t miss any EMI payments.
Can I pay all EMIs on my credit card at once?
Yes, most banks allow you to pay off all remaining EMI instalments in a single payment. This is a good option if you suddenly have extra funds and want to reduce your interest burden. However, check with your bank to confirm there are no prepayment penalties or charges for early settlement. Paying off EMI early can also help improve your credit utilization ratio and boost your credit score.
What are the eligibility criteria for credit card EMI?
Eligibility for credit card EMI depends on several factors. First, you need to hold an active credit card with a bank or issuer that offers this facility. Most issuers, including HDFC, ICICI, and SBI, require a minimum transaction value of Rs. 10,000. Your credit score plays a role too. A CIBIL score of 700 or above generally improves your chances. Some banks also consider your repayment history and current credit utilization before approving a conversion request. Card type matters as well. Premium or co-branded cards may offer better EMI terms compared to entry-level cards. Always check directly with your issuer for the most accurate eligibility conditions before making a large purchase.
Does credit card EMI affect credit score?
Yes, credit card EMI does affect your credit score, and the impact can go either way. When you convert a purchase into EMI, the outstanding amount blocks a portion of your credit limit, which increases your credit utilization ratio. A higher utilization ratio can pull your CIBIL score down temporarily. On the other hand, making consistent, on-time EMI payments signals responsible credit behaviour to bureaus, which can gradually improve your score over time. The key risk is missing a payment. Even one missed EMI gets reported to CIBIL and can drop your score significantly. If you are planning to apply for a home loan or personal loan soon, try to keep your EMI obligations manageable before that.
Are there any processing fees for credit card EMI?
Most banks charge a one-time processing fee when you convert a credit card transaction into EMI. This fee typically ranges between 0.5% and 2% of the principal amount, depending on the issuer and the tenure you select. For example, HDFC and ICICI may charge up to Rs. 199 to Rs. 999 as a flat processing fee on certain EMI products. Zero-cost EMI offers, often available during festive sales, usually waive this fee, though the merchant may absorb the cost. Always read the fine print before confirming an EMI request. The processing fee, combined with interest, can meaningfully change the total cost of your purchase if you are not careful.
Does opting for EMI reduce my credit card limit?
Yes, opting for credit card EMI reduces your available credit limit for the duration of the repayment period. When a purchase is converted to EMI, the total outstanding amount is blocked against your credit limit. For instance, if your card has a limit of Rs. 1.5 lakhs and you convert Rs. 60,000 into a 6-month EMI, only Rs. 90,000 remains available for fresh purchases. Each month, as you pay an instalment, the blocked amount reduces and your usable limit gradually restores. Once the final EMI is paid, your full credit limit becomes available again. This is worth planning around, especially if you anticipate other large expenses during the repayment period.
How long does it take for EMI conversion to reflect on my statement?
After you submit an EMI conversion request, most banks process it within 1 to 3 business days. The converted amount then appears on your next monthly credit card statement as individual EMI line items. If your request is submitted just before your billing cycle closes, the conversion may only reflect on the statement after the next cycle. This means your first EMI instalment could fall in the billing period following conversion. Timing matters here. If you want the EMI to start from a specific month, submit the request at least 5 to 7 days before your statement date. Processing timelines can vary slightly between banks like HDFC, SBI, and ICICI, so confirm with your issuer.
How does missing an EMI payment affect my credit score?
Missing a credit card EMI payment can have a serious impact on your financial health. Banks report missed payments to credit bureaus like CIBIL and Experian, and even one missed EMI can drop your score by 50 to 100 points. Beyond the score impact, you will face late payment charges, which vary by issuer but typically range from Rs. 200 to Rs. 1,000. If the default continues, the bank may also revoke your EMI facility and convert the outstanding balance back to revolving credit, attracting a much higher interest rate. To recover, start by clearing the overdue amount immediately, then maintain a consistent repayment record for the next 6 to 12 months to see your score improve.
Is Credit Card EMI deducted automatically?
Credit card EMI is not directly deducted from your savings account the way a personal loan EMI would be. Instead, the monthly instalment amount appears as part of your credit card statement, and you are expected to pay the minimum due or total due by your payment deadline. If you have set up auto-debit for your credit card bill, the EMI amount gets included in that auto-payment. To avoid missing payments, you can link your savings account and enable auto-pay for the full outstanding amount each month through your bank’s mobile app or net banking portal. Jupiter’s Credit Card Bill Payment feature makes it straightforward to set this up and stay on top of your EMI schedule without manual intervention.
Can I pay all EMIs on my credit card at once?
Yes, most banks offer a foreclosure option that lets you pay off all remaining EMI instalments in one go. This can save you interest on the unpaid months, though some issuers charge a foreclosure fee, typically between 2% and 3% of the outstanding principal. To foreclose your EMI, log in to your bank’s app or net banking portal, navigate to the EMI section, and select the foreclosure option. Alternatively, you can call customer care to initiate the process. Before proceeding, calculate whether the foreclosure fee outweighs the interest you would save by closing early. In most cases, paying off early still works out cheaper, and it frees up your credit limit for future use. Always confirm the process with your specific card issuer.
