Many people often see the EMI (Equated Monthly Installment) option while purchasing items such as mobile phones, TVs, laptops, or even flight tickets and click on it without much thought. At that moment, the small monthly payment seems manageable, and it feels like an easy way to spread out the cost.
However, experts warn that converting credit card purchases into EMIs can come with hidden costs and charges that are not always clearly disclosed by banks or merchants. These can include processing fees, interest rates higher than expected, or prepayment penalties. While the monthly EMI may look affordable, the total repayment over the tenure can end up being significantly higher than the original purchase price.
Here are some key points to keep in mind:
Processing Fees: Banks often charge a small percentage of the purchase amount as a processing fee for converting your purchase into EMIs. This fee may not be prominently displayed during checkout.
Interest Rates: Some EMI plans offer “zero percent interest,” but hidden interest may still be included in processing charges or other fees. Always read the fine print to understand the effective interest rate.
Tenure and Total Cost: Longer EMI tenures reduce monthly payments but increase the total cost. Shorter tenures may save on interest but result in higher monthly deductions.
Prepayment or Foreclosure Charges: If you want to pay off your EMI early, banks may charge a penalty. Knowing this beforehand can help you plan repayments better.
Impact on Credit Score: Regular EMIs affect your credit utilization ratio and timely repayment is crucial for maintaining a good credit score. Missing EMI payments can negatively impact your credit rating.
Experts advise consumers to carefully evaluate whether converting a purchase into an EMI is truly cost-effective. Sometimes, saving up for a purchase or using other low-cost credit options may be a better choice. Always check the detailed terms and conditions provided by your bank or merchant and calculate the total repayment amount before opting for an EMI.
In summary, while EMIs make large purchases seem more affordable, hidden charges and unclear disclosures can make them more expensive than expected. Consumers should stay informed and read all the fine print to avoid surprises later.
Disclaimer:
The views and opinions expressed in this article are those of the author and do not necessarily reflect the official policy or position of any agency, organization, employer, or company. All information provided is for general informational purposes only. While every effort has been made to ensure accuracy, we make no representations or warranties of any kind, express or implied, about the completeness, reliability, or suitability of the information contained herein. Readers are advised to verify facts and seek professional advice where necessary. Any reliance placed on such information is strictly at the reader’s own risk.
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