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What is Credit Card EMI & How Does it Work?

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December 1, 2022


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What are Credit Card EMIs?

With digital-first payments everywhere, it’s never been easier to use credit cards for cashless transactions. With credit card EMIs, the amount you owe your card issuer is converted into an EMI the same way a personal loan is.

Credit card EMI payments serve as a viable option for those who can’t pay their credit card bills in one go. It is also appropriate for those who prefer to pay a small amount of what they owe and have the rest carried forward with an element of interest.

Understanding the Mechanisms of Credit Card EMIs

  • Credit card providers charge interest on late or incomplete payments. Paying your credit card bills in full and on time each month avoids interest charges, which are only applied to late or incomplete payments.
  • Credit card EMIs benefit credit card holders as they have some wiggle room in case of a financial crunch. They can use their credit cards for transactions and repay at a later date.
  • Ordinarily, it is possible to convert credit card transactions into EMIs when you purchase something that exceeds ₹10,000. This EMI will then be calculated considering the interest rate that your credit card issuer levies, the tenure of repayment you opt for, and the down payment you make.
  • For better understanding, let's assume you buy a washing machine for ₹40,000 with a ₹15,000 down payment. The remaining ₹25,000 can be paid in 12 EMIs over 1 year, with a 12% interest rate. Each EMI will be ₹3,000 for the next 12 months.
To understand the process of calculating credit card EMIs in detail, please go through this guide.

Converting Credit Card Payments Into EMIs

You are entitled to convert your credit card payments into EMIs when you carry out a transaction on your card itself. If you lack the necessary funds or can only cover a certain amount of your purchase, you can pay that amount as a down payment. The remainder of your credit card bill can be converted into EMIs. 

It is important to understand that to have the EMI option available to you, your bank or credit card issuer must deem you eligible. This is because EMIs are ultimately viewed as loans that are then repaid on a monthly basis. 

Therefore, banks and other credit card issuers will carry out a check to deem you worthy. Factors that are checked include your credit score as well as repayment habits with previous loans and current loans. 

Factors to Consider - Credit Card EMIs

It is important to be aware of the following factors related to the credit card EMI process.

1. Interest Rates

Different banks and credit card issuers levy different rates of interest on EMIs. This rate will also depend on the time frame within which you intend to pay off the amount completely. Ordinarily, shorter time frames incur lower interest rates, while longer tenures attract higher interest rates.

2. Declining Rate of Interest

Most banks charge interest based on the reducing balance method. This means that the interest rate applicable depends on the balance amount of the loan that remains at the end of each month.

3. Repayment Time Frame

In most cases, you are allowed to choose a tenure that can range from 6 months to 2 years. Certain banks also offer 3-month tenures.

4. Processing Charges

Certain banks don’t charge a fee for converting purchases into EMIs, making it possible to save some money. In case these fees do apply, banks may choose to forgo them during festive seasons.

5. Cancellations

Credit card EMIs can be cancelled in case you have the funds necessary to pay off your EMI prior to your tenure’s end. You will, however, be required to pay a certain amount of money as a foreclosure fee. Long-time customers may be able to forego this charge.

Final Thoughts

While credit card EMIs are convenient, it is important to note that not every credit card provider offers this facility for all cards. Further, each time you opt for an EMI, your credit limit declines per the principal amount. It is important to remember that most credit card EMI services have a ‘delayed payment penalty’ clause which should be understood properly. Credit card debt is serious and can be very expensive. Always better to make payments on time to avoid any hassle.  

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Frequently Asked Questions

1. How do EMIs work with credit cards?

With credit card EMIs, the amount you owe your credit card issuer is converted into an EMI the same way a personal loan is. It is possible to convert credit card transactions into EMIs when you purchase anything that exceeds INR 10,000.

2. What is the interest applicable on credit card EMIs?

Different banks and credit card issuers levy different interest rates on their credit card EMIs.

3. What is better: EMIs or full credit card payments?

Whether or not credit cards or their EMI services are better depends entirely on card holders. If you are able to pay your credit card bill in its entirety each month, ordinary credit card transactions are viable. If you can’t pay your whole credit card bill on time, credit card EMIs are appropriate.

4. Is credit card EMI good?

Credit card EMI is a good option to opt in for when you are unable to pay your credit card bills at one go. Your late payments can have a higher interest rate than your EMI. But do know that if you are unable to pay your EMIs on time, it can bring your credit score down along with paying a penalty.

5. What is the difference between credit card and credit card EMI?

When you use a credit card, you spend your issuers money on your transactions. At the end of the month, you pay the issuer back. In the case of you not being able to pay back in full, you might have to take your payment forward which comes with a strong levied interest. It's in cases like this where you can opt in for a credit card EMi that helps you splity your bill payments in a way that suits you.


Fi Money is not a bank; it offers banking services through licensed partners and investment services through epiFi Wealth Pvt. Ltd. and its partners. This post is for information only and is not professional financial advice.
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