Interest and Fees on Credit Card EMI Payments

An understanding of the fees and interest rates associated with credit card EMI payments is essential. Before converting your credit card bill to EMI, it is crucial to review the charges below, as they can have a substantial impact on the total cost of your purchase.

Interest Rates and Fees for Credit Card EMI

Banks can offer interest rates on credit card EMIs that range from 8% to 24.84% per annum. For instance, HDFC Bank assesses interest rates that fluctuate between 11.88% and 24.84% annually. In the same vein, Axis Bank and State Bank of India provide interest rates of approximately 1.5% per month and 14%, respectively. The rates for credit card EMI options are generally higher than those for traditional loans, which is indicative of the convenience and flexibility they provide.

Credit Card Interest and Fees

EMI Conversion Processing Fees

Processing fees are an additional expense associated with the conversion of your credit card bill to an EMI, in addition to interest. These fees may vary from 0.5% to 3% of the transaction amount, contingent upon the bank and the type of EMI facility. For instance, certain EMI options are subject to a processing fee of up to ₹999 by HDFC Bank. Standard Chartered Bank implemented a one-time processing fee of up to 1% (plus applicable taxes) for Merchant EMI conversions on February 19, 2024.

Application of GST to Interest Charges in Credit Card EMI Transactions

GST (Goods and Services Tax) is also levied on the interest component of credit card EMI transactions, in addition to processing fees and interest. The effective interest rate can be elevated by 18% of the interest amount, thereby increasing the total cost of finance. For instance, if the interest rate is 16%, the effective rate would be 18.88% after including GST.

No-Cost EMI: Understanding the Hidden Charges

Although options for no-cost EMIs may appear appealing due to their absence of explicit interest charges, they frequently incur indirect costs. Merchants may incorporate the interest into the product price or provide discounts to compensate for the interest; however, GST on the interest component remains applicable.Therefore, even with no-cost EMI, you might end up paying more due to GST on the interest.

Calculating Total Costs

To make informed decisions, it's vital to calculate the total cost of your credit card EMI payments, including interest, processing fees, and GST. Using online EMI calculators can help you estimate these costs accurately. It is crucial to compare different financing options to select the most cost-effective one for your requirements.

FAQs

1. What are the typical interest rates for credit card EMI payments?

   Interest rates for credit card EMIs vary among banks but generally range from 8% to 24.84% per annum.

   
   

2. How much are the processing fees for EMI conversion? Processing fees can range from 0.5% to 3% of the transaction amount or be a fixed amount like ₹99912.

   
   

3. Does GST apply to credit card EMI interest? Yes, GST is applicable on the interest component of credit card EMI transactions, increasing the effective interest rate.

   
   

4. What are no-cost EMI options, and do they involve hidden charges? No-cost EMI options do not charge explicit interest but may involve indirect costs like GST on interest and higher product prices.

   
   

5. How can I calculate the total cost of credit card EMI payments? You can use online EMI calculators to estimate the total cost, including interest, processing fees, and GST.