Personal Finance

Want to convert credit card debt into EMI? Here’s a checklist

Vivek Ananth | Updated on November 06, 2019

Avoid paying exorbitant interest on your unpaid credit card debt which can range from 24 per cent to 48 per cent per annum   -

The interest rate charged on these loans range from 16% to 22% per annum

The festival season is over and many of us would have also gone overboard with our shopping. Just when you are on the verge of calling a friend and requesting for a line of credit, a tantalizing email or text message pops up in your inbox from your credit card company asking you whether you have overspent during the past month and would like to repay the bill through equated monthly payments.

While this may sound like a quick-fix solution, there are many risks attached.

Let’s look at the things you should keep in mind before clicking on that link in your inbox to convert your credit card bill into EMIs.


First things first. You can opt for making EMI payments at the time of making the purchase or after you have swiped your card. If you opt to convert your holiday spends (or monthly spends) into EMIs, you should understand that even after the conversion, the amount continues to be a part of your credit card limit that you have used, until you repay the loan.

Pay extra attention to the interest that you are charged. Different durations like 6 months, 12 moths or 18 months have different interest rates. The interest rate charged on these loans range from around 16 per cent to 22 per cent per annum. It’s important to balance your interest outgo with the amount of EMI that you are comfortable with as you could end up paying a really high amount of interest if you extend the period too much.

The next thing to keep in mind is the fees. When you convert a credit card transaction into an EMI payment, there is a fee that your credit card company will recover from you. ICICI Bank and SBI charge around 2 per cent of the loan amount as processing fees (GST is charged additionally), while HDFC Bank charges 1 per cent of the loan amount. Some banks usually set a minimum and maximum amount of processing fees that they will collect from you. Chances are that your credit card company will even charge you a pre-payment fee to close the loan.

Remember to pay full dues

If you have converted some of your credit card transactions into a loan and are paying EMIs on them, make sure that you repay the full monthly dues on other credit card transactions (that are not converted into loan) promptly, and on time.

After converting a credit card transaction into a loan and then paying EMIs on it, if you avoid paying the full amount of your credit card bill, you are certainly heading for trouble.

Here is why

You are already paying interest with your EMI. That has already negated the benefit of a credit-free period that comes with credit cards.

Then, if you don’t pay your full credit card bill (not the minimum amount due), you will have to pay interest on the balance that remains unpaid.

At that time, if you get another offer to convert the unpaid balance into a loan and start paying EMIs on them, you will find yourself deeper in trouble. Don’t make it a habit to convert transactions into an EMI just because you overspent in the festival season. It would be wise to look for other options to repay your credit card debt in case you find yourself unable to pay the minimum amount due, after converting some transactions into loan.

Options to reduce card debt

As explained before, your credit card is only useful if you are using it judiciously and squeezing out the benefits of an extended credit period to make your payment. In case you find yourself in a situation where your credit card debt is piling up over a period of time, you can take a personal loan, which is available at rates from about 11 per cent to 18 per cent (per annum), to repay the dues.

This way, you can avoid paying exorbitant interest on your unpaid credit card debt which can range from 24 per cent to 48 per cent (per annum).

You can also opt for a personal loan with a lower interest rate to pay off the transactions that you might have converted into a loan on which you are paying a higher interest than the personal loan.

Do keep in mind the prepayment fee that your credit card company may charge you.

Above all, consider all these options in situations where your credit card debt is getting out of hand because you have not paid the full amount due on your credit card for multiple billing cycles.

Finally, try not to overspend the next festival season.

Published on November 06, 2019

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