You will be amazed to learn that there are over 58 million credit card users in India. The credit card user base in India has grown exponentially over the past few years. In 2015, there were only 22.7 million credit card users. This is very low as compared to the current estimates. More people are using credit cards today to manage financial emergencies. It is one of the best tools for short-term credits. The best credit card companies often reward their users to keep them as loyal customers.
A credit card provides users a pre-specified limit that can be used to purchase goods and services, both offline and online. There have been innovations in the credit card domain to make this product more customer-friendly. Credit card EMIs is one such innovation that has been massively adopted by users. Read on to learn more about credit card EMI.
What is a credit card EMI?
Credit card EMI is a payment option available for credit card users that allow them to make a purchase using credit. Through the EMI option, they have the flexibility to repay the total amount in monthly installments over a given period. It is a great tool for those who are not looking to overspend their budget on expensive items. When a user makes a purchase using an EMI option, the total amount of purchase is locked on the card, and the monthly installment is paid using that amount. This means that you won’t be able to spend the ‘locked’ amount on other purchases.
For example, if you purchase a television worth INR 40,000 using a credit card EMI option, this amount will be locked on your card. Let’s assume that you have a credit limit of INR 1,00,000 on your card. Now, you will be able to spend from the remaining credit limit amount after locking the balance for television purchases. In this case, you are left with INR 60,000 on your credit card to make additional purchases. Your locked balance will be available once the installments are deducted.
Different types of credit card EMIs
Now that we have understood what a credit card EMI entails, let’s dig deeper to learn about its types. Primarily, there are two types of credit card EMIs offered by most banking and non-banking financial institutions that issue credit cards.
Zero rate EMIs
The zero interest rate EMI options are a great choice for any customer that wants to avail of the EMI option without paying any extra charges. There are no hidden interest payment charges in a zero-rate EMI option. The availability of Zero-rate EMIs depends on your card issuer and the merchant offering products.
Low-rate interest EMIs
The low-rate interest EMIs option allows users to leverage their credit cards without having to pay high-interest charges that are normally applicable on credit card bills. Usually, the low-rate interest is in the range of 1.25% to 1.99% per month. Some credit card issuers also apply a prepayment fee to advance payment by users.
Benefits of availing different forms of credit card EMI options
There are numerous benefits of availing of different forms of credit EMI options. Let’s take a quick look at some of the most prominent ones.
Lower interest fee
One of the most significant benefits of credit card EMIs is the interest charges on these payment options. You can easily choose to repay your outstanding credit dues at a lower interest rate with this option. The interest rate charged on credit card dues is normally between 20% to 40% per annum. Choosing a low-rate EMI will help you get a good bargain on the interest fee.
Easy financing option
Credit card EMIs are one of the best ways to finance big purchases that require paying a huge amount. When you use an EMI payment option, you have the flexibility to repay this amount over a few months. This is an easy financing option that is also budget-friendly since you won’t have to pay an aggressive interest rate.
No interest payment option
The zero-interest-rate EMI option available is great for all users as they don’t have to bear any interest expenses on their purchase. Most credit card issuers provide the zero-interest-rate EMI option to make the offer more lucrative for customers.
Instant access to easy credit
Credit card users who have a good track record of timely repayment are offered a pre-approved credit card loan. This amount can be borrowed for meeting financial emergencies. Since it is pre-approved it doesn’t require additional documentation and there is no waiting period. Users can choose to repay the borrowed amount in easy EMIs that have a lower interest rate.
Merchant discount offers
Another important benefit of paying through credit card EMIs is the availability of different merchant offers. Depending on the tie-ups of your credit card issuer, there are many merchant discount offers provided to credit card users.