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When faced with a high credit card bill, converting the due amount into EMIs (Equated Monthly Installments) can be a practical solution. This option allows you to split your bill into manageable monthly payments, providing financial relief and flexibility. However, it’s crucial to understand the implications and make an informed decision. Here’s a detailed look at converting credit card dues into EMIs.
THE CONVENIENCE OF EMIs
Enhanced Purchasing Power
Credit cards offer the convenience of access to funds and the freedom to use them as needed, enhancing your purchasing power. However, this convenience comes with the responsibility of timely repayment to avoid high interest rates and negative impacts on your credit score.
Splitting High Bills
When your credit card bill is high, converting the amount into EMIs can ease the financial burden. By splitting the bill into smaller, more manageable payments, you can repay it over a tenure that suits your financial situation.
INTEREST AND FINANCIAL CONSIDERATIONS
Interest Liability
Opting for EMIs on your credit card bill comes with an interest charge, which can sometimes be higher than anticipated. It’s essential to assess your comfort level with the additional interest before choosing this option. Avoid making a habit of converting every high purchase into EMIs.
No Cost EMIs
Some merchants offer ‘No Cost EMI’ options on purchases, allowing you to repay the amount in smaller installments without additional interest. However, be cautious of hidden charges and ensure you understand the terms fully before committing.
AVOIDING DEFAULT AND DELAY
Reduced Risk of Default
Choosing EMIs reduces the risk of defaulting on credit card payments. By selecting a tenure that aligns with your income, you can manage your repayments more effectively. Remember, the longer the tenure, the longer the debt and interest burden.
Higher Interest Rates
Interest rates on credit card EMIs can range from 15% to 24% or higher. While this may sometimes be lower than the usual credit card interest rates, it varies based on the bank and individual credit records.
SIMPLIFIED PROCESS
No Documentation Required
Converting credit card dues into EMIs typically requires no additional documentation. This ease of access makes it a convenient option during financial crunches or emergencies.
MANAGING FINANCIAL EMERGENCIES
Utilisation Limits
Financial experts recommend keeping credit card utilisation below 30% to maintain a good credit score. However, emergencies like medical expenses, education, or marriage may necessitate higher spending. In such cases, converting the bill into EMIs can help manage the repayment without delay.
IMPACT ON CREDIT LIMIT AND SCORE
Credit Limit Blockage
When you convert your bill into EMIs, your credit limit is blocked for the entire amount. As you repay through EMIs, your available credit limit gradually increases. It’s important to monitor your credit limit and avoid making multiple high-value purchases until dues are cleared.
Credit Score Management
Exceeding your credit card limit can negatively impact your credit score. Conversely, timely repayment of EMIs can improve your credit score. Paying off dues before the due date further enhances your creditworthiness.
KEY TAKEAWAYS FOR CLEARING DUES
- Interest Rates: Interest on credit card EMIs is often high, ranging from 15% to 24% or more. However, it may still be lower than standard credit card interest rates.
- Prudent EMI Usage: Avoid converting all purchases into EMIs to prevent long-term debt accumulation.
- Credit Limit Management: Converting dues into EMIs blocks your credit limit, which increases as you repay. Monitor and manage your credit limit carefully.
CONCLUSION
Credit cards offer a convenient way to manage expenses and defer payments, but they must be used judiciously to avoid debt traps. Converting credit card dues into EMIs can provide financial relief, but it’s essential to understand the associated interest and impact on your credit limit and score. Make informed decisions and use this option wisely to maintain financial health.
Consider Reading – KEEPING A CREDIT CARD