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.
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.
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.
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