Credit cards are very popular nowadays because of its ‘buy now and pay later concept’. It eliminates the need of carrying cash. A credit card is very beneficial when you don’t have enough cash in hand. You can buy anything from malls or stores by just swiping your credit card.
The credit cards are very easy and safe to use. It also allows you to pay the minimum amount due to your credit card bill and carry forward the outstanding balance to the next month’s billing cycle. This process is known as a revolving credit card facility. Revolving credit card is not a good option as availing this option would incur finance charges.
The financial charges are 3% to 4% of the outstanding balance per month and it multiplies to up to 50% in a year. So, you should always try to avoid availing revolving credit unless it is absolutely necessary.
Pros of Credit card EMI
Increases Purchasing power
Credit cards increase your purchasing power at the time when you have financial crises. Cards also allow you an interest-free credit period which is generally of 20 to 52 days. Normally cards companies levy heavy interest on outstanding bill amount which ranges 42% to 46% but if you convert it in credit card EMI the rate of interest will be reduced to something between 14% to 18%.
Attractive online offers available
Many online websites offer lots of attractive offers to purchase things on credit card EMIs. Retailers have tied up with credit card companies to offer a discount on purchasing good and services. These are mainly available on electronic products, watches etc.
No loan approval required
Buying things from credit card doesn’t require any approval like loans. You just need to check the offers available online, It is more beneficial when you are buying expensive things, you can purchase it by your credit card and can convert it into EMIs which is easily repayable.
Improve CIBIL score
Paying regular EMIs helps in improving and creating a credit score. If you repay your dues at regular interval of time, the card companies send reports of payment activity to credit bureaus which build and improve credit score.
Cons of credit card EMI
Higher interest rate
You have to pay monthly installments until you are done with principal payment. Sometimes you have to pay the higher rate of interest by paying for an item under EMI, consumers have to pay extra to the banks.
No early repayments
Credit card EMIs does not allow you prepayment of EMIs when you have sufficient funds. It is one of the major disadvantages of taking things on EMIs. Some Banks and NBFCs allowed but charges higher prepayment charges. Denna sida will become difficult for you when you wish to close your EMIs earlier.
Extra charges on skipping EMIs
If you skip or misses to pay the said EMI on time, the lenders charge some late fees. Bank and Non-Banking Financial companies (NBFCs) have strict terms when it comes to repayment through EMIs. Skipping multiple EMIs may lead you to face legal action or your collateral can be taken away by the bank.
So, above these are the pros and cons of credit cards EMIs, before taking goods and services on credit card EMIs always consider all these points.