Want to convert big credit card transactions into EMIs? Here’s how to do it in easy steps | Mint

Want to convert big credit card transactions into EMIs? Here’s how to do it in easy steps | Mint

Source: Live Mint

Have you run up a huge credit card bill? Finding it tough to make the bulk payment in a single stroke? Converting some of your big-ticket transactions on your credit cards into EMIs (Equated Monthly Instalments) to ease the pressure can well be the answer. 

But there are several things you must be aware of—interest rates, exclusions, the impact on credit score, credit limit and credit utilisation ratio before you convert your large bills into EMIs. Here is a step-by-step guide on converting big-ticket credit card transactions into EMIs.

Also Read | Does converting your credit card bill into EMI impact your credit score?

How can you convert credit card transactions into EMIs?

You have to first check with the lender to know whether your credit card is eligible for the same. This can be done either through net banking or phone banking. Once you find out that your card is eligible, you can log into the bank’s portal and convert your transactions into EMIs. 

Please do note that all transactions are not eligible. Lenders typically do not allow purchase of gold or jewellery, fuel purchases, gambling and cash transactions to be converted into EMIs. 

Moreover, transactions that have crossed a certain time limit are also not eligible for conversion. While some banks have kept the time limit at 30 days, others have fixed it at 60 days. So, you should take the EMI option within a month or two from the date of the transaction.

What is its impact on credit limit/score and credit utilisation ratio?

If you convert big-ticket transactions into EMIs, the credit limit, to the extent of the transaction, will be blocked. 

For instance, if you convert a transaction valued at 70000 into EMIs and your total credit limit on your credit card is 7 lakh, your new credit limit will be only 6.3 lakh. You will be able to utilise your full credit limit only when you complete the payment of your EMIs. “What you should know is, your credit limit gets blocked when you opt for SmartEMI,” according to HDFC Bank.

Since a portion of your credit limit gets blocked, your credit utilisation ratio (CUR) will also be adversely affected. But if you are able to keep CUR at the ideal rate of 30% even after the big-ticket transaction is converted into EMIs, then it will not be a problem. If the CUR exceeds the ideal level, it will also impact the credit score.

Apart from the above listed factors, EMIs do not affect your credit score. “Converting to EMI does not negatively impact your credit score as long as you make timely EMI payments. However, late payments can affect your credit score,” according to ICICI Bank.

Credit card EMIs will also not affect your credit history. “In fact, it will help you avoid and prevent yourself from late payment charges, thus mending your credit score. Thus, converting your credit card bill into EMIs will help maintain your credit score,” ICICI Bank said.

How about the interest rates and other charges on such EMIs?

Interest rates on credit card EMIs are usually lower than the rates for overdue credit card bills. Though the rates vary with each lender, an interest of 1%-1.75% per month on a ‘monthly reducing balance basis’ is charged on such EMIs. Overdue credit card bills attract a monthly ‘revolving interest’ of more than 3%. “The interest rate is determined based on your eligibility, and you can view this rate once you click your desired tenure,” according to HDFC Bank.

Also Read | Credit card cash withdrawals: What’s the real cost?

A one-time processing fee, which can be up to 2%-3.5% of the transaction value is charged at the time of EMI conversion. Transaction values of as low as 1500 can be converted into EMIs and the tenure ranges from three months to 48 months. EMIs are billed as part of the credit card statement that is generated on a monthly basis. So, you have to pay your EMIs along with your regular credit card bill.

Allirajan M is a journalist with over two decades of experience. He has worked with several leading media organisations in the country and has been writing on mutual funds for nearly 16 years.

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