Credit Card EMIs - How Does It Work!

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shashankjha69

shashankjha69

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*I didnt know where to post this, so after deliberating for a while, I am posting this thread here.*

I am credit card n00b. I have always used debit cards for online shopping. So anyway I am thinking of buying a new laptop for my father, and since a lot of e-commerce website are offering interest-free emi , i am thinking of availing this.
I have a hdfc credit card which i have used just once. So i have no idea how credit cards work. (I paid back the charged amount within a week).
Can anyone explain me how and what will i charged? And how the entire emi thing works.

P.S - I am buying laptop worth rs 36000, emi for 6 months.
 
shashankjha69 said:
(I paid back the charged amount within a week).
P.S - I am buying laptop worth rs 36000, emi for 6 months.
Click to expand...

So you have paid the EMI or the entire 36K.

In short Payment reflection,Emi amount calculation depends on your billing cycle.

More info needed to provide clear picture.
What is your billing cycle and when did u purchase it ?
What is the mode of payment? If netbanking which bank you have used to pay?
 
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Usually there is a flat processing fee. Flipkart charge 1500 flat fee for 12 months interest free EMI.

First, your card limit should be equal to or more than the value of the product you are purchasing. In this case, it is 36k. When you purchase the product whole 36k will be charged to the card. However when the statement comes you will be asked to pay only the EMI amount which is equal to ( Product cost + Processing fees)/Time period. Please note that the whole amount is subtracted from the limit, so even if you only have to pay the EMI, the usage limit status will still show 36k less than your actual limit until you pay off the amount. Each month your usage limit will increase by the amount you pay as EMI.
Also make sure that you don't make the purchase very close to your statement generation date as sometimes it takes 3-4 days for the amount to be converted to EMIs by the bank.
 
Oh I was just referring to an earlier incident where I'd paid back the billed amount within a week to the bank. :P. I am yet to place an order for the laptop. So if i opt for the credit card emi payment option (say 6 months, emi = 6k) how much will i be charged/ month?

From Flipkart FAQs
When prompted to choose a 'Payment Option', select 'Credit Card (EMI)'. Choose the bank and plan (3, 6, 9 or 12-month) of your choice and enter your credit card details. Once the payment is authorized, your order will be processed and shipped. You will need to pay the total amount, in the pre-determined number of instalments, as per your credit card billing cycles.

(This bit on Flipkart is confusing me)

The EMI option is interest-free for the customer. Please note that the full amount will be charged on your card on the day of the transaction. Within 7 days, you will see a credit for the full amount. The first EMI charge will happen subsequently. If your card's billing date falls within those 7 working days, you need to pay only the EMI amount to the bank
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:confused:
 
The reason to go for EMI is the discount you get 10-15%.

But the credit card company pays the full amount. So assuming you pay back every month on time, then who takes care of the 10-15% balance ?
 
@shashankjha69 This is how it might probably be:
Let us say your credit limit in the card is Rs.50000.
You will make a transaction for Rs.36000 when you pay for the laptop (while choosing the EMI option). Immediately, your card will be charged the entire Rs.36000, and your available credit limit will now show as Rs.14000.
Now, within 7 working days, your card will show a credit for Rs.36000.. The available credit limit will however remain at Rs.14000.
Then, when your subsequent bill is generated, you will see an entry for Flipkart EMI as Rs.6000. When you pay this amount within the due date, your available credit limit will increase correspondingly to Rs.20000... The same for the subsequent months. Hope that was clear.

Please do note.. as someone mentioned above, usually there is a processing fee for EMI transactions from the bank's side.. In some cases, this is also equally divided into 6 EMIs, or in same cases, the first month you only get the processing fee in the bill.. subsequently, you get the EMIs.
 
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No. If you are getting the discount of 10-15% the company pays the balance amount.

Product = 1000
FK offering 10% discount on Credit Card = 100
Final price = 900

You choose 3 month EMI.
Bank pays 900 to Fk. You get your product.
Your credit card had limit of 10000
Now it becomes 9100 (10000 -900(your product))
Your credit card bills at 24th every month (Confirm this by calling customer care)
Payment date is mostly around 15 days so due date becomes 8th of next month.
you pay the amount = 300 (900/3. Assuming you are charged no processing fee.)
Again this month your bill cycle is 24th.
Again you pay next month = 300.

Till this cycle is complete. Hope you get answer to your queries.
 
xtremevicky said:
No. If you are getting the discount of 10-15% the company pays the balance amount.

Product = 1000
FK offering 10% discount on Credit Card = 100
Final price = 900

You choose 3 month EMI.
Bank pays 900 to Fk. You get your product.
Your credit card had limit of 10000
Now it becomes 9100 (10000 -900(your product))
Your credit card bills at 24th every month (Confirm this by calling customer care)
Payment date is mostly around 15 days so due date becomes 8th of next month.
you pay the amount = 300 (900/3. Assuming you are charged no processing fee.)
Again this month your bill cycle is 24th.
Again you pay next month = 300.

Till this cycle is complete. Hope you get answer to your queries.
Click to expand...
Here's the deal i was referring to.

Who's offering the cashback ? the e-store

i don't understand how/why they can discount by 15% if a credit card is used. How does the store make it back.
 
blr_p said:
Here's the deal i was referring to.

Who's offering the cashback ? the e-store

i don't understand how/why they can discount by 15% if a credit card is used. How does the store make it back.
Click to expand...
Samsung and Standard Chartered collaborated to make such an offer. Samsung will give the cash back.

How does this benefit both?

1. Samsung: See, If you have a credit card and you are cant pay the whole amount then this offer will make sure you only have to spend 3K a month. This would increase the number of people buying it because now it becomes affordable.

2. SC :- The more you spend on you credit card the better it is for them. The more you spend the more the chances are that you might screw up the payment dates.

It is a win win for both. Also , S4 can be found much below against that offer so Samsung wont lost out even after the offer.
 
xtremevicky said:
1. Samsung: See, If you have a credit card and you are cant pay the whole amount then this offer will make sure you only have to spend 3K a month. This would increase the number of people buying it because now it becomes affordable.
Click to expand...
This bit i get but to offer as steep a discount as 15% !!

People must not be buying as much as samsung would like.

xtremevicky said:
2. SC :- The more you spend on you credit card the better it is for them. The more you spend the more the chances are that you might screw up the payment dates.
Click to expand...
Heh, the cc companies bet i can screw up the payment but i'm betting against the house. I can make the payments. Plan to pay all essentials with a cc, taxes, utility bills etc. That way i cross their annual minimum on what i have to spend and effectively have the card for free.

No need to build up credit rating in india unlike in the US.

xtremevicky said:
Also , S4 can be found much below against that offer so Samsung wont lost out even after the offer.
Click to expand...
Don't follow.

Where can you presently find an S4 for lower than that offer ?

Lowest i saw was maybe 2k below but that was when the rupee was stronger a month or so back.
 
blr_p said:
This bit i get but to offer as steep a discount as 15% !!

People must not be buying as much as samsung would like.


Heh, the cc companies bet i can screw up the payment but i'm betting against the house. I can make the payments. Plan to pay all essentials with a cc, taxes, utility bills etc. That way i cross their annual minimum on what i have to spend and effectively have the card for free.

No need to build up credit rating in india unlike in the US.


Don't follow.

Where can you presently find an S4 for lower than that offer ?

Lowest i saw was maybe 2k below but that was when the rupee was stronger a month or so back.
Click to expand...

The 15% discount is on 41K. Thats around 34K. This is price I was able to find at HS18 after the coupons. So that is not really a huge discount but yes its a good deal.

Me spending 35K today is very less probable then 3K a month. Hence this encourages people to get a credit card and buy a phone which they thought was out of their budget.

I have 3 credit cards and all are free and have not missed a single payment. Yes the credit rating here is not as effective as US but it does exist. Head over to RBI's website to know more. You can get your credit score online also (Confirm the last part).
 
pradeep200417 said:
Just one extra question. Is the interest rate of 3 or 4% per month still charged over the total amount of purchase?
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In case you miss the full payment then you will be charged this amount.

Due Amount: 100
Minimum Amount : 20

People get carried away and pay the minimum amount. You should always pay the whole amount unless you want the next amount to be very high.
 
i used to work for a company (Innoviti) who provides EMI facility to all major electronic shops (Spice, TMS, Bhari Walmart, etc). In truth the EMI processing charges are very less 1.3-3.5%. Most of the times these charges are absorbed by the merchant to boost sales or by the OEMs. The EMI process has been explained by others quite clearly other than that CC companies uses the EMIs as loans to external borrowers (quite a lengthy explanation).

If you have any other doubt pm me :)
 
Interesting thing happens if you cancel the order bought with EMI option.
My friend bought some phone for 20K from flipkart on EMI. His CC was charged and next day he cancelled his order.
He got the refund as per the time they say would take, surprisingly he got refund twice. Its 40K credited to his CC.
He was happy thinking there might me some mistake from their end. :P
But when the bill came, they were deducting the EMI amount.
(I have no idea why they do that)
 
mathrisk said:
Interesting thing happens if you cancel the order bought with EMI option.
My friend bought some phone for 20K from flipkart on EMI. His CC was charged and next day he cancelled his order.
He got the refund as per the time they say would take, surprisingly he got refund twice. Its 40K credited to his CC.
He was happy thinking there might me some mistake from their end. :p
But when the bill came, they were deducting the EMI amount.
(I have no idea why they do that)
Click to expand...
This is also one smart way of not losing your credit limit in CC :) I did once!
 
blr_p said:
Heh, the cc companies bet i can screw up the payment but i'm betting against the house. I can make the payments. Plan to pay all essentials with a cc, taxes, utility bills etc. That way i cross their annual minimum on what i have to spend and effectively have the card for free.
Click to expand...

I used to think so too (and have always made payments on time) till I saw so many people default on their payments or pay the minimum amount mentioned on the bill.
 
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