EMI Credit Cards: In today’s fast-paced world, shopping for high-value items has become much easier than before, thanks to EMI (Equated Monthly Instalment) credit cards. These cards not only make large purchases manageable by converting them into EMIs, but also offer cashback, zero down payment, and a host of other perks. So let’s understand how these cards work, what are their features, and what are the benefits and drawbacks that you should consider before opting for one.
How do EMI Credit Cards work?
EMI credit cards are specially designed for people who want to buy high-value consumer goods, such as electronics, home appliances, or even two-wheelers. These cards come with a pre-approved credit limit and are slightly different from standard credit or debit cards with EMI conversion options. So here’s how they work:
1. Automatic EMI Conversion: Compared to regular credit cards, purchases made with the EMI card are automatically converted into EMIs. This feature eliminates the need for you to place a separate request.
2. Pre-Qualified Benefits: Some EMI cards offer pre-approved shopping benefits and loans depending on the customer’s profile. Meaning, you can buy your favourite items without worrying about loan approval.
3. Auto-Debit Facility: Monthly EMI amount is directly deducted from your bank account on a fixed date through NACH (National Automated Clearing House) mandate, which you set while applying for a loan.
Eligibility and Tenure
You need to fulfil certain eligibility criteria to get an EMI card. These requirements are similar to credit cards and personal loans:
1. Age Criteria: Applicants should be between 21 and 65 years of age.
2. Income Requirements: Salaried people should have a minimum income of ₹10,000 per month, while self-employed individuals have to show an annual ITR of at least ₹6 lakh.
3. Documentation: The documents require identity proof (Aadhaar card, PAN card, voter ID), address proof, and income proof (salary slips, bank statements, or ITR). Apart from this, you also have to provide a cancelled cheque and signed ECS (Electronic Clearing System) mandate.
Tenure of EMIs: Repayment period typically ranges from 3 months to 60 months. Most people opt for a tenure of 6-12 months, which is decided at the time of your purchase.
EMI Credit Cards Ke Key Benefits
EMI credit cards come with a number of features that make them attractive to shoppers:
1. Zero Down Payment: Most EMI cards allow you to buy items without making an upfront payment, making it easier to manage your finances.
2. Cashback and Discounts: Some cards offer 2.5% to 5% cashback on online purchases. Apart from this, exclusive discounts and gift vouchers are also available.
3. Interest-Free Period: Like credit cards, EMI cards also offer an interest-free period of up to 50 days on purchases.
4. Manageable Payments: Dividing large purchases into smaller and fixed monthly payments helps you manage your financial planning better.
5. Instant Access: Through these cards, you can instantly buy high-value items from partner outlets and distributors of leading brands.
Drawbacks to consider
While EMI cards have many benefits, they also have some limitations that you must consider:
1. Hidden Costs in ‘No-Cost EMIs’: When ‘no-cost EMIs’ are offered, most lenders include processing fees as hidden costs, which increase the overall cost of the product. In 2013, RBI banned ‘no-cost EMIs’ as the interest elements were hidden in the product price.
2. Interest Rates: If you miss a payment or opt for an extended tenure, you have to pay higher interest rates, which may outweigh the benefits.
3. Eligibility Barriers: Income and credit score requirements may be challenging for some people, which may prevent them from getting access to EMI cards.
4. Limited Benefits Cap: There is a cap on cashback and reward points, which reduces the value of those perks for high spenders.
Conclusion
EMI credit cards are an excellent solution for those who want to manage their big-ticket purchases affordably. By converting your spend into manageable monthly installments, these cards provide you with a hassle-free shopping experience. Additional perks like cashback, zero down payments, and interest-free periods also make them an attractive option for shopaholics. But, it is important to read the terms and conditions carefully, avoid hidden costs, and ensure timely repayments so that you get the maximum benefit of these cards. If used wisely, EMI credit cards can be a valuable financial tool to simplify your shopping experience, without affecting your budget