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How does EMI on credit card work ?

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Are you one of those shopalcohlic people who buy goodies without having any money to pay for the product and subsequently use the EMI on credit card option to pay over a period of time without understanding how does EMI on credit card work ? If yes, then the next few months are going to render you a poor man – that is because with so many festivities coming up, consumers will be enticed to empty their wallets and you might be making the credit card payments by EMIs if you are short on cash.

Payment of credit cards can be done in two ways – one is pay off the entire principal without paying any interest and the other is to pay a small amount now and carry the rest of the principal to the future by paying interest.

The third option is converting the entire amount into an equated monthly installment for credit cards – much like you pay each month in a home loan. However, you need to first understand how does EMI on credit card work before committing to such a liability.

Let us first try to understand the impact of converting a payment into such EMI purchases on credit cards. If you think the credit card company is allowing you to pay in installments without any extra charge, you might be a bit shocked. Read on to find out.

How does EMI on credit card work

Credit card companies make money by earning interest on late payments that you make. If you are paying off your credit card bills within the due dates, then essentially you are not contributing to their profits. You are not in their good books!

To lure shoppers to take up a repay-in-future-and-pay-interest option, the EMI on credit cards option works great to their benefit. It also comes as a temporary respite for the buyer as he might be facing a cash crunch at the time of the purchase.

EMI on credit cards work much like a home loan or a personal loan – you pay the principal and interest each month and clear off your debt over a period of time. Put it simply, that is how EMIs on credit cards work.

Almost all the credit card companies offer two variants of the EMIs – one is a free zero interest rate EMI and the other is a low interest rate EMI.  The word low is used here as it is lower than the late payment interest rates that you would have paid normally in case of the non EMI option.

So if you look at it, the bank is riding on your inability to pay now to be converted into future dated payments with a slightly lower interest rate. If the credit card companies do not allow for this, then you might actually default and not pay them any interest, leave alone the principal. So it works good for them as well.

The zero interest rate EMI is a no brainer – if you purchased something of say Rs 24,000, then this gets converted into an EMI of Rs 2,000 each month. You do not have to pay anything extra here and the credit card company does not earn anything out of you. Hence, such offers are free and far between.

How does EMI on credit card work

The low interest rate EMI option calls for interest rate in the range of 1.25%-1.99% per month which in most cases is lower than the normal rate charged on a credit card late payment.

What you must note is that banks will levy processing fees before you can use any of these options. Also, if you want to prepay, then you might end up paying a pre payment charge as well.

Talking about processing fees, you must note that this is bundled with the principal and service tax is levied on the total amount and that gets converted into EMIs – that is awful – paying EMIs on processing fee + service tax!!

Once you take the EMI route, your credit card limit is automatically reduced by the amount of principal outstanding. As and when you keep paying the EMI, the debt reduces. But till the time you bring this down to zero, be aware of the fact that you cannot shop upto the allowed original credit card limit any more.

Another thing to take a note is that once you convert into an EMI, many banks will ask you to pay this EMI as a minimum payment due each month. So while the EMI option was meant to put the consumer at ease with small payments over a period of time, that payment now has a bloated minimum amount ! Seriously crazy.

Look at this note from ICCI Bank –

We wish to inform you that with effect from September 24, 2012, the calculation method for Minimum Amount Due (MAD) payable on your ICICI Bank EMI Credit Card has been revised, MAD shall now be 5% of the outstanding amount.

In case of any repayment through EMI, the EMI amount due during the statement period will be added to the MAD.

Other points to be aware of

This facility might not be always available round the year.

Also, purchases from select merchants might only qualify for such a scheme.

If you think you are going to default on payment of your credit card dues, then it is wiser to opt for paying via the EMIs on credit card. A default will not look good on your credit score and will also come at a higher rate of interest.

Converting into an EMI option is also valid on purchases above a limit. For example, ICICI Bank will convert minimum purchases of Rs 3000 into EMIs of 3,6,9 or 12 months. And not just that, if you want to go via net banking for EMI conversion, then purchases greater than Rs 5000 can only qualify.

Last Word on how does EMI on credit card work

If you are caught in the rut of paying via EMIs on credit cards then you must do some serious introspection on how you are conducting your lifestyle. Consumers fall for such traps when they shop for consumer durables like laptops, TVs and other gizmos that might not really be mandatory for them to buy. One needs to understand how to control lifestyle expenses and differentiate between needs and wants.

Over to you now – have you been bitten by this bug already and did you learn anything new on how does EMI on credit card work ?


  1. Jatin Kacha

    October 8, 2012

    Post a Reply

    Nice article,

    Two important aspect very well mentioned. That is impact on “minimum due amount” for every billing cycle & “reduce in your credit limit”.
    Once must have to understand pros & cons before opting for EMI options.

    • TheWealthWisher

      October 9, 2012

      Post a Reply

      Yeah Jatin, you are very right. Most of the people never understand these 2 points. Thanks for pointing them out again.

  2. Rakesh

    October 8, 2012

    Post a Reply

    Very informative and detailed article. I think we should pay the entire amount before due date and do not opt for EMI. We should make use of the bill-cycle and shop accordingly. If your bill cycle is 5th every month then we should start buying on 6th. That way you get enough time. Why buy when you cannot pay……

    • TheWealthWisher

      October 9, 2012

      Post a Reply

      Yeah that is the right approach, pay before every due date and get over with it.

  3. Harish

    January 24, 2013

    Post a Reply

    I booked a ticket of about 19412 INR(including some charges which were above 1000 INR ‘coz I chose EMI of 6 months) using ICICI platinum chip credit card. My credit limit is 20000 INR. My EMIs are about 3500 INR. It seems that except the next due date(by which, of course, I will pay the first EMI), I can pay the rest of the amount by the next dyue date. But I need some suggestions whether I can do it or not? Please I need some advice about the pros and cons related to this buying of mine. Am I in some sort of trouble? :(

    • TheWealthWisher

      January 29, 2013

      Post a Reply

      What is not clear is whether you are talking specifically about your EMIs here or any dues other than EMIs ? If it is EMIs, then you have to pay by the date. You can pay a minimum due on your credit card and carry over the rest but then you will need to pay charges. Long story short – clear all your credit card dues.

  4. Manoj

    February 11, 2013

    Post a Reply

    Its a very informative article… good work. But i am still confused.
    I have a HDFC emv platinum credit card. My credit limit is 30k. I already have a product of 8.5k on emi of 12 months. So suppose my available credit limit is 23k, then can i make another purchase of 36k( a laptop ) on 6 months emi (6k /month) ?. Actually I failed in doing so, and i regret now on that 8.5k purchase… :( Or any alternative i can find??
    Thank you

    • Badman

      October 9, 2014

      Post a Reply

      You answered your own question.
      So suppose my available credit limit is 23k, then can i make another purchase of 36k( a laptop ) on 6 months emi (6k /month) ?.

      Your limit is 30k (available balance is 23k). You cant buy anything more than the available limit.

  5. abhijeet

    March 7, 2013

    Post a Reply

    i recently swiped ma hdfc credit card for buying laptop of 42,ooo in a 6 months e.m.i option…,
    as mentoined by the merchant the interest rate and processing fee was zero %.
    so now what will be my first month and next emi’s worth…??
    also if i pay all the 6 emi’s on specified time ….do i have to pay more than 42k…if yes then how much….?
    i am 1st time creditcard user
    kindly suggest …
    thanks in advance

  6. Shibi Kannan

    July 9, 2013

    Post a Reply

    EMI on credit cards is juts a marketing strategy and sounds nice when they advertise 0% down payment, 0% interest and blah blah blah !!!
    The key message here is your available credit limit is reduced by the total amount of purchase which is completely misguiding and unethical as they make it sound as if you owe only the minimum monthly EMI amount right away when you are signing up for such a scheme. Recently I bought a smartphone for INR 25000 and was about to make the mistake of opting for EMI scheme. Then they told me that my available credit will be reduced by exact the same INR 25000 and have to pay a processing fees of 3.5% to ICICI bank. I have no clue why would someone opt in for such madness. I denied the scheme and paid in full. I am better off paying my credit card dues than this stupid scheme.

  7. juli

    August 26, 2013

    Post a Reply

    I want to pay my cc bill but the bank is not giving me installment option to pay off the bill.Please suggest Wat can b done. Hdfc is the chor bank I have ever worked wit.

  8. vachan

    September 9, 2013

    Post a Reply

    I want to buy a smartphone that costs 30,000rs . But my HDFC credit card limit is 20,000. And i am getting this by 6 montha EMI, That makes 5,000 per month. Can i buy it through this credit card limited to 20,000rs???

    • tushar

      October 8, 2013

      Post a Reply

      i think you can, but u ll be charged for going over your credit limit , i think it’s around 3%

      talk to your bank officials about or call the customer care

  9. Akshay hb

    February 15, 2014

    Post a Reply


    I need a clarity on credit card with emi (non zero interest rate)

    If I purchase a product worth 10000 and go for emi (say 6 months). How much I’ve to pay every month.

    Assuming, 12% for 3 and 6 months
    13% for 9 and 12 months. (interest rate per annum right? )

    Please let me know how to calculate these monthly payments.

    What extra charges will be applicable (like processing fees, service tax)? How to include these while calculating monthly payments?

  10. Lakshman Rao

    March 29, 2014

    Post a Reply

    Hallo replay all above questions if ur a don in credit card related issue
    R else have 5 times n sleep well..

  11. Naved

    May 27, 2014

    Post a Reply

    suppose in the first month i paid twice the EMI amount i.e instead of 5K i paid 10K together.
    and in the second month i dont have money.
    Will interest be charged for the 2nd month?

  12. mansoor

    June 27, 2014

    Post a Reply


    I just got my first new ICICI Bank coral credit card as it is mentioned in my first statement my joining fee is 199.+24.60= 223.60 is it true? Because when I was reading through there website it states of 1000 + tax joining fee and one complementary tie worth of around 900/-
    I want to know what is correct above I am bit confused?

    As my credit limit is 30000 per month for now,
    if I buy a product worth of 16000 with full payment from credit card (without EMI) I want to be it should deduct from my saving account right at the moment I purchased (I dont know whether it is possible or not)?

    But please do let me clear this and Thank you for your detailed article really help us.

  13. somesh raghani

    July 27, 2014

    Post a Reply

    i have icici bank credit card is limit 40000 and i want to purchase laptop on creditcard emi of 12 month laptop price is 27800 i want to know that the amount of laptop was full deducted or monthly deduct

  14. Yashwanth

    July 28, 2014

    Post a Reply

    My credit limit in ICICI bank is 18000. If i buy a product of 18000 in 3 EMI’s and pay the 1st EMI of 6000. Would the credit limit be the same i.e., 18000 second month onwards.

  15. sam

    August 1, 2014

    Post a Reply

    very well explained.
    you must have had a lot of trouble with credit cards I suppose :P.

  16. ashu007

    August 24, 2014

    Post a Reply

    from where does the emi amount gets deducted? i mean, if i have a credit card from my salary account and each month i get salary, then emi should get deducted automatically from my salary balance? m i right?
    and WTF is a due date????

  17. Nikhil Kulkarni

    August 25, 2014

    Post a Reply

    Thanks for explaining in details. My question is as follow.

    I am very much fond of iPhone 5S (white color). One trusted retailer have offer of 42k for the same. Due to some financial constraint, I will be able to pay upto 15k in cash.I am also not having credit card right now. How much in general interest credit card cos charges over mobile phones? Which credit card you will advise to opt? If I take a credit card, how should then I go for EMI? Will it be before payment of rest 27k or after? My assumption is like this. Say r= 2% per annum (even I am not aware of interest rate and how they charge it per annum or per month for credit card), I chose 12 months as p then on 27k amount, Interest will be 2*1*270= 540, sum will be 27540 and EMI will be 27540/12= 2292 rs?

  18. Vicky

    November 6, 2014

    Post a Reply

    I have a question.
    If I purchase something on EMI with Credit card for 6 months & I want to clear EMIs all at once at first EMI (off course by paying all at once in first month) then may it be possible?
    May this still cause my next month credit card minimum due to be at least the EMI amount??
    Please suggest.

  19. JEGAN J

    December 6, 2014

    Post a Reply

    hello sir. my sbi credit card limit is rs.30000/-. i want to purchase a mobile worth rs.20000 through emi. weather the first emi amt 4000 only deducted or the whole 20000/- deducted ah?
    kindly clarify me

  20. Sharath

    December 11, 2014

    Post a Reply

    My credit limit in ICICI card is 30000.I am planning to buy a macbook pro worth 70000 online through EMI. Is that possible?Please help.

    • Manikantan

      January 2, 2015

      Post a Reply

      Sorry bro…. Pls ignore my previous reply to ur comment…. i missed out you bought a macbook of 70000.

  21. Vijay

    December 24, 2014

    Post a Reply

    Hi.. I have done online shopping for 35000. I gonna convert it into EMI payment. But, Again i want to shop for 20000 since my credit limit is 60000. Whether i can shop further for 20k and convert tat also into EMI or till completing EMI’s for 35K , i cant shop or convert 2nd EMI for 20k ?? please advice on this

  22. Dhanavarsh Reddy

    December 30, 2014

    Post a Reply

    Hello sir, I want to buy a product if Rs. 40,000 on EMI for 12 Months. But my credit card limit is only 25000. It is possible to buy a product over the credit card limit. Please help me

  23. Manikantan

    January 2, 2015

    Post a Reply

    I have swiped my card with 40000 on various occasions on a particular statement period. And everything is on EMI. Will i have to pay the minimum amount due or the Total due amount before the due date so that i could enjoy interest free days if i swipe during the next statement period. My card limit is 50k. Hope i am clear with my question.
    Kindly suggest me.
    Thanks & regards


    February 28, 2015

    Post a Reply

    I have got my HDFC credit card my online bank account shows credit limit avilable is Rs-100000 if i buy something on emi then how they will deduct my amount on monthly basis?

  25. Atul Aditya

    March 2, 2015

    Post a Reply

    I want to purchase a bike (worth Rs 65000), I have HDFC CC (with limit of Rs 50000)
    can I make the payment of Rs 50000 throw card?
    what will be EMI & interset rate? please suggest.

    Thanks & Regards,
    Atul Aditya

  26. yash kashyap

    March 5, 2015

    Post a Reply

    Hello I am a new user of credit card and I want to know that if i purchase any mobile on Emi then full amount of mobile will taken by merchant or only Emi payment. Please give me ans

  27. Ashok

    March 7, 2015

    Post a Reply

    I am a HDFC credit card holder for 6 years and I want to cancel as i have cleared all my dues. currently ZERO balance. While giving the credit cards these banks will offer and sit on our heads to get their targets completed, but while deactivating/cancellation of the card these bank people are very irresponsible and never provide proper information or service. Can any one suggest what will happen if I keep this card with out using and destroy it.

  28. Sajal Mitra

    March 9, 2015

    Post a Reply

    I had bought an item for an EMI of 9 months. Its 2 months already and I have the remaining EMI amount with me. If I pay the whole remaining amount now, will I be charged anything extra? Used an ICICI Credit Card if that helps.

  29. Ronie

    March 30, 2015

    Post a Reply


    Got most of the info i was looking for…however i have one question

    say, my credit limit is 60000 & i have purchases of 40000 put & thinking of putting it into an EMI..

    now when i use the remaining 20000 of my credit limit after EMI, will that involve revolving credit interest rates by any chance ,,,..? Or simply my card limit is reduced to 20000 & no interest will be charged till the due date for this portion of credit??

  30. ritesh mohanty

    April 7, 2015

    Post a Reply

    Plz smeone help me regarding paying of EMI. I bought a phone of 36k @ 9 months EMI with 4k every month. I want to know what happens if i pay the whole amount before 9 months say in 6 months and what happens if for 1 month i pay 8k instead of 4k????

  31. Prashanth

    July 31, 2015

    Post a Reply

    Does it send a confirmation message to my phone every month that the amount has been deducted?

  32. Nandan

    August 26, 2015

    Post a Reply

    I had made 6 transactions on an HDFC Credit card which amounted to Rs.50,000. Therefore, I converted the whole amount to an EMI. But, processing fees has been charged on individual 6 transaction. Is this right?

  33. Dhanush

    September 2, 2015

    Post a Reply


    I just got the titanium times credit card from HDFC bank and i have a limit of 45000 and presently i do not have any money with me and i need to pay the gold interest of 15000 rs and i want to leave the car for service which would cost around 25000 rs so i’m planning to swipe the card and then convert them to EMI. i want to know can i convert the purchase into EMI without paying any amount initially or should i pay some amount to get converted to EMI other than processing fees.

    • Madhupam Krishna

      October 7, 2015

      Post a Reply

      Dear Dhanush,

      No extra amount other than the processing fees and interest rate..

      But think again you want to spend almost entire card limit in the very first month… Expenses plan karo boss.. Credit Card are for convenience and emergencies.

  34. Prashanth

    October 4, 2015

    Post a Reply

    I have a kotak mahindra bank credit card. Limit is 18,000
    I want to buy apple Mac pro 60,000
    If it is possible to take on 12 months emi ,
    pls help me. I don’t know about credit card

    • Madhupam Krishna

      October 7, 2015

      Post a Reply

      Dear Prashanth,

      You cannot do so as your limit is 18K and you want to purchase for 60K. The purchase has to be with in overall credit limit.
      Why don’t you save for some money may be through a RD or SIP in Short Term Income Fund and than go for the purchase.

  35. Guruprasad Bhavsar

    October 14, 2015

    Post a Reply

    Hello, I am ICICI Credit Card User. I order A phone of Rs5099 with 3 EMI but the whole amount 5099 got dedicated my from Credit Limit. So my confusion is Do i need to pay only EMI value next month or the complete amount?

    • Madhupam Krishna

      October 15, 2015

      Post a Reply

      Dear Guruprasad,

      Credit limit is total amount you can borrow on that card. So if limit is Rs 20000/- and as you said you purchased a mobile worth Rs 5099 the credit card limit will go down to Rs 14901 assuming no other transaction happened on the card. Now when you are paying EMIs monthly, the paid value is added to the limit and it increases every month and regains in full when you pay the last EMI. So pay the EMI only as mentioned in the Total Amount Due column.

  36. Vijay Thakur

    November 10, 2015

    Post a Reply

    I have been using my HDFC Bank credit card since 4 years.
    but in recent past year due to finical crises i am unable to pay my CC outstanding full amount. so i am paying min amount due sine 4 to 5 months.
    1) Now,i want to know that in what respect does it harms me, or my C-bill record.
    2) Also Currently my Smart EMI option is also disables, with undue reason. calling HDFC customer care din’t helped me.

    kindly highlight on above mention points.
    Vijay Thakur

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