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  • Category: Miscellaneous

    Important: Credit card payment can be made through EMIs!

    I didn't know it! Banks enable credit card dues to be converted into personal loan with provision to pay the outstanding amount through EMIs. The card-issung bank offers the option to convert the dues to loans either at the time of purchase or a later date when the outstanding amount is overdue. It depends upon the credit history of the card-holder. The card-issuing bank usually specifies the conitions for which the EMI facility is available in terms of specific purchases.

    The EMI facility actually converts the credit card dues into a loan, which is at a lower rate than the rate which the credit card charges. This is done by the banks as a strategy to indirectly encourage the card-holders to spend more.

    Although this information may be useful for some people, I feel that all of us must try to avoid such debt-trap.
  • #591359
    Most probably most of the Members know about this (conversion of credit card outstanding payment into EMI), although this had been unknown to me.
    Caution: Explosive. Handle with care.

  • #591373
    Most of the credit card companies are themselves have the ratings of their own customer and on seeing our month installment paying abilities sincerely, they voluntarily give rating and even give messages for the next lot of loan readily available with the same papers. Even when you take the loan from Financial companies for vehicles, the same system is followed. Now a days the banks are rich with cash, thanks to demonetization effect and there fore they are exploring possibilities to give loans in different ways. So this is one more facility for the credit card holder to tie up with bank account and pay the balance through staggered installment.
    K Mohan
    'Idhuvum Kadandhu Pogum "
    Even this challenging situation would ease

  • #591419
    I am not a card user, so I was not familiar with this thing. But it is obvious that any bank will put this kind of a "honey trap" for the customers as they also need to sustain in this economy. So this information was helpful for me, but not shocking at all. That is why you will see banks are so very eager to give you their credit cards and sometimes for free.
    Live life Kingsize!

  • #591420
    I do not think it is any kind of debt trap or "honey trap" if one manages his finances properly.

    Partha, please elaborate what you meant by the following sentence of yours - "The EMI facility actually converts the credit card dues into a loan, which is at a lower rate than the rate which the credit card charges. "

    When you talk, you are only repeating what you already know. But if you listen, you may learn something new!

  • #591472
    The charm and benefit of credit card is lost if repayment is made in EMIs. Then it becomes a term loan.

    Credit card usage is for easy turnover and not for long-term liability. The liability I credit card should be liquidated within the bill due date period. Then only we get the real benefit of using credit card .
    The only advantage in converting credit card payment in EMI is the absence of laborious documentation unlike a loan.

  • #591477
    Gypsy: The credit card otustanding is converted into personal loan. The rate of interest in case of personal loan is less than the interest on credit card dues.
    Caution: Explosive. Handle with care.

  • #591565
    Partha,

    According to my experiences so far, the interest rates for personal loans vary from person to person depending on the CIBIL rating. The interest rate for a personal loan starts from around 9% per annum on a reducing basis and can go on upto 40% depending on the profile of the borrower.

    So, one cannot generalize - " The rate of interest in case of personal loan is less than the interest on credit card dues."

    When you talk, you are only repeating what you already know. But if you listen, you may learn something new!

  • #591571
    Gypsy: Is it so? Some people whom I know very well. have taken personal loan @ 18% p.a. Both of them took personal loan from two different public sector banks. However, I don't have much idea about this varying rate of interest on the basis of CIBIL rating in respect of personal loan.
    Caution: Explosive. Handle with care.

  • #591668
    Patha,

    Any idea whether those personal loans @ 18% p.a. are on reducing basis or on flat basis? For your information, a loan @ 18% p.a. on flat basis will be equal to something around 33% on reducing basis. I do avail the loan facilities from time to time and the interest rates at which I have availed the loans so far start as low as 8.75% p.a. reducing till 13% p.a. reducing. Anything beyond 13 -14% p.a. on reducing balance is just a loot for me.

    Secondly, if a credit card holder gets a purchase converted to EMI than he is normally charged 12 -15 % on reducing balance depending on the tenure of the loan and depending on the bank.

    So, now you would see that
    a) Interest rates vary from bank to bank & it depends on the CIBIL & profile of the person
    b) Your statement - "The rate of interest in case of personal loan is less than the interest on credit card dues." - does not hold good.

    The only "debt trap" ( would not prefer to use "honey trap", since it is used for something else, I believe) that one should avoid is making part payment of the dues on one's credit cards. That is where the bank's game start.

    I do not agree with the Venkiteswaran's following statement either in the context of credit cards- "The only advantage in converting credit card payment in EMI is the absence of laborious documentation unlike a loan."

    A personal loan is just a call away, minus all the documentation, in case of credit card holders. The loan amount check is home delivered or the loan amount is transferred to an account through NEFT/RTGS.

    Hope it helps!

    When you talk, you are only repeating what you already know. But if you listen, you may learn something new!

  • #591683
    Personally I always try to avoid any type of loan and I don't use credit card. Till date, I have taken home loan from a private bank and my experience was horrible. The so-called efficiency of private bank has been proved hollow. Later I transferred my loan to a Government bank and finished the loan very quickly. My past experience with credit card was also not good. So, I have stopped using credit card.
    My common sense says that if the rate of interest of EMI is less than the rate of interest charge by the credit card, a person must go for converting the credit card outstanding to EMI.
    Most probably, the Member who used the phrase 'honey trap' doesn't know the real meaning of this term. He/She got confused between 'debt trap' and 'honey trap'.

    Caution: Explosive. Handle with care.


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