EMI cards and credit cards are two popular plastic money payment options that individuals can use to purchase goods and services. Both these cards are widely accepted in most stores and have similar benefits.
However, there are fundamental differences between them that can make one choice more suitable than the other depending on an individual's needs, finances, and credit history. This article highlights the key factors that individuals should consider when choosing between an EMI card vs credit card. It also provides information on how to apply for an EMI card online.
What is an EMI Card?
EMI is an acronym that stands for Equated Monthly Installments. An EMI Card is a type of payment card issued by various lenders such as Bajaj Finserv, SBI, HDFC Bank, and others that allows individuals to make big-ticket purchases and pay for them in monthly installments. This card is similar to a credit card in that it allows individuals to buy goods and services on credit. However, the main advantage of an EMI card vs credit card is that it provides individuals with pre-approved credit limits that they can use to make large purchases without the need for a down payment or collateral.
What is a Credit Card?
A credit card is a type of payment card that allows individuals to make purchases on credit and pay for them at a later date. It is issued by banks and other financial institutions to individuals who meet their creditworthiness criteria. Credit cards provide users with a credit limit that they can use to make purchases up to a fixed amount. They charge an interest rate on the balances carried over to the next billing cycle, and most of them come with annual fees.
Factors to Consider when Choosing Between EMI Card vs Credit Card
Credit Score
Your credit score is a critical factor that lenders consider when approving credit card applications. It is a three-digit number that reflects your creditworthiness based on your past credit history. The higher your credit score, the more likely you are to get approved for a credit card or an EMI card. However, while credit cards require good to excellent scores, EMI cards usually require lower scores, making them ideal for individuals with low credit scores.
Cost and Fees
Both EMI cards and credit cards come with costs and fees. These include annual fees, interest charges, processing fees, late payment fees, and others. When choosing between an EMI card vs a credit card, individuals should compare the costs and fees associated with each card to determine which one is more affordable and suits their budget.
For instance, while an EMI card may come with a processing fee, there is no interest charged on the monthly installments. In contrast, while credit cards may not have processing fees, they charge high-interest rates on unpaid balances, making them more expensive in the long run.
Rewards and Discounts
Rewards and discounts are a significant consideration when choosing between an EMI card vs credit card. Credit cards offer various rewards and discounts, including cashback, miles, reward points, and others, for every purchase made with the card. Additionally, some credit cards offer exclusive discounts on specific purchases, such as travel, entertainment, and dining.
On the other hand, EMI cards do not offer rewards or discounts for purchases made with the card. However, some EMI card lenders offer discounts, such as zero processing fees, pre-approved offers, and additional discounts from partner stores.
Interest Rates
Interest rates are an essential consideration when choosing between an EMI card vs credit card. Credit cards usually charge high-interest rates, ranging from 1% to 3% per month on the unpaid balance, making them expensive if you do not pay the entire balance in full. In contrast, EMI cards charge 0% interest on the monthly installments.
Therefore, if you are planning to make a significant purchase and want to pay it off in monthly installments, an EMI card vs credit card might be a better choice. However, if you plan to pay off the entire balance in full, a credit card might be more suitable.
Credit Limit
Another critical consideration when choosing between an EMI card vs credit card is the credit limit. EMI cards usually provide a pre-approved credit limit that you can use to make purchases up to a fixed amount. In contrast, credit cards also come with credit limits, but they may be higher than the credit limit on an EMI card.
Therefore, if you require a substantial credit limit for a large purchase, a credit card might be a better choice. However, if you need a more affordable option and have a lower credit limit, an EMI card may be more suitable.
Repayment Terms
Repayment terms are an important consideration when choosing between an EMI card vs credit card. Credit cards come with a minimum payment due, which is usually a percentage of the outstanding balance. If you only pay the minimum balance, you will continue to accrue interest charges on the unpaid balance.
In contrast, EMI cards come with fixed monthly installments that you can use to pay off the outstanding balance. The installment amounts are determined based on a predetermined repayment period and the total outstanding balance.
Therefore, if you want fixed repayment terms and a clear understanding of how much you need to pay each month, an EMI card vs credit card may be more suitable.
Conclusion
In conclusion, both EMI cards and credit cards are viable payment options that individuals can use to make purchases. However, when choosing between an EMI card vs credit card, individuals should consider their credit score, costs and fees, rewards and discounts, interest rates, credit limit, and repayment terms. By understanding these factors, individuals can choose the type of card that suits their budget, needs, and future financial goals. Additionally, those interested in applying for an EMI card can do so conveniently online by searching for a lender, comparing the terms and conditions and submitting their application online.