Interest and Fees on Credit Card EMI Payments

When opting for credit card EMI payments, understanding the associated interest rates and fees is crucial. These charges can significantly impact the overall cost of your purchase, making it essential to review them before converting your credit card bill to EMI.

Interest Rates and Fees on Credit Card EMI

Interest rates on credit card EMI can vary from 8% to 24.84% per annum among banks. For example, HDFC Bank charges interest rates between 11.88% and 24.84% per year. Similarly, other banks like State Bank of India and Axis Bank offer interest rates around 14% and 1.5% per month, respectively. 8. These rates are typically higher than those for regular loans, reflecting the convenience and flexibility offered by credit card EMI options.

Interest and Fees on Credit Card

Processing Fees for EMI Conversion

In addition to interest, processing fees are another cost linked to converting your credit card bill to EMI. These fees can range from 0.5% to 3% of the transaction amount, depending on the bank and the type of EMI facility. For example, HDFC Bank charges a processing fee of up to ₹999 for certain EMI options. Standard Chartered Bank introduced a one-time processing fee of up to 1% (plus applicable taxes) for Merchant EMI conversions effective from February 19, 2024.

Applicability of GST on Interest Charges in Credit Card EMI Transactions

In addition to interest and processing fees, GST (Goods and Services Tax) is also applicable on the interest component of credit card EMI transactions. This can increase the effective interest rate by 18% of the interest amount, adding to 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

While no-cost EMI options seem attractive as they do not charge explicit interest, they often involve indirect costs. Merchants may include the interest in the product price or offer discounts to offset the interest, but GST on the interest component still applies. 24. 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 accurately78. 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 EMI 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.