Buy the power of EMI cards
G one are the days when you needed to save diligently for months together to buy an object of desire: electronic items, furniture, consumer durables, gadgets. Now, they can be yours on instant credit, with the added attraction of the facility to pay in easy instalments at no extra cost. Enter the EMI card. "Convenience and the pre-approved feature are reasons behind the popularity of these cards," says Brijesh Dalmia, director, Dalmia Advisory Services. "It's a great marketing strategy that appeals to shoppers."
Bajaj Finserv, the market leader in the EMI card segment, claims to have more than 10 million members. Capital First is another major lender in the category and offers the 'Easy Buy EMI Card'. There are also several emerging online players, such as Kissht, Snapmint and ZestMoney, offering the zero-cost EMI conversion option on online markets, such as Amazon, Flipkart and Snapdeal, to name a few.
Big purchases made easy
A major attraction of the EMI card is that it offers zero-cost finance. Once you have decided on a product at a particular price from a store, you can convert the amount to be paid into equal EMIs of your choice. You need not pay any processing fee or interest. This makes the EMI card a product that is very simple to understand. Vishal Dhawan, founder and chief financial planner at Plan Ahead Wealth Advisors, cites one of main factors behind the popularity of these cards: "It's the ability to make higher value purchases in smaller sized digestible bits that they (buyers) believe is affordable for them."
An EMI card is a payment instrument that comes with a pre-approved loan amount. Once you make a purchase through this card, you have taken a loan of that amount from the lender. Unlike other loans, you need not provide documents at the time of buying the product. The loan can be paid through EMIs within the tenure of your choice, typically three months to 24 months. The EMI card can only be used at stores that the lender has tie-ups with for offering finance. "There is a deal with the manufacturer to finance these purchases and also promote sale of their respective products," says Dhawan. "But by opting for EMIs, there could be discounts the customer is missing out on with respect to purchases."
EMI card companies that have the potential to bring high business volumes are able to bargain better with the manufacturers and dealers and get processing fee and interest payment through instant discount on the product. So you get the benefit of institutional bargaining in the form of zero-cost EMI.
Other finance options
Credit cards and consumer durable loans also offer the option to convert your purchases into EMIs, but they charge you a processing fee and higher interest rate, which could range from 12 to 20 per cent. This is where EMI cards net you a saving. "They are cheaper than the typical credit card EMIs. EMI cards offer a flexible monthly payment option as a standard feature," says Suresh Sadagopan, founder, Ladder7 Financial Advisories. "No revolving credits in this, unlike a credit card, or converting to EMI, which is also costly. Thus, EMI cards are very attractive for someone with a tight cash flow." If you wish to foreclose other loans, you will have to pay foreclosure charges. However, EMI cards do not charge any fee if you wish to make the full payment midway.
How to get an EMI card
You can apply for the Bajaj Finserv card from the store you are making your purchase from. Pick your product on easy finance by making a down payment and dividing the balance amount into EMIs. When you go for easy finance with the lender, you will be given the option of applying for the EMI card. Once you have paid 3-4 EMIs, your EMI card will be sanctioned and sent to you. Bajaj Finserv also gives consumers the option of applying for an EMI card online.
However, to get the Easy Buy EMI Card from Capital First, you need to be an existing borrower of a consumer durable loan or two-wheeler loan. EMI card providers, such as Kissht, Snapmint and Zest Money, offer the facility to apply for the card online. Once your application is approved, the lender assigns a credit limit against your EMI card, which is dynamic. You can get a credit limit anywhere between Rs 30,000 and Rs 4 lakh, depending upon various factors, including your credit score. You can either use the credit limit to make a single big purchase or can buy multiple times. The repayment is linked to your bank account from where the EMIs are deducted.
The EMI card comes for a nominal joining and annual fee. For instance, Bajaj Finserv charges Rs 412 as one-time joining fee for its Gold EMI Card, and an additional Rs 117 only when you do not use your card for one year. The card gives you a wide shopping range. It can be used in more than 950 cities at more than 43,000 stores. It's not only limited to the purchase of big merchandise. An EMI card also gives you the option of converting your grocery store purchases-typically above a cut-off amount-into EMIs.
Use it judiciously
An EMI card sounds attractive as it frees you from the compulsion of saving to acquire a product. But it makes sense not to go overboard while using it as you will need to be disciplined with repayments in order to keep enjoying the facility in future. "I would advise people using EMI cards to decide what they want to buy and their budget for it before stepping into a store," says Sadagopan. "Once at a store, they should just stick to the product they wish to buy rather than indulge in impulsive shopping."
An EMI card is a payment instrument that comes with a pre-approved loan amount. Once you make a purchase through this card, you have taken a loan of that amount from the lender. Unlike other loans, you need not provide documents at the time of buying the product. The loan can be paid through EMIs within the tenure of your choice, typically three months to 24 months. The EMI card can only be used at stores that the lender has tie-ups with for offering finance. "There is a deal with the manufacturer to finance these purchases and also promote sale of their respective products," says Dhawan. "But by opting for EMIs, there could be discounts the customer is missing out on with respect to purchases."
EMI card companies that have the potential to bring high business volumes are able to bargain better with the manufacturers and dealers and get processing fee and interest payment through instant discount on the product. So you get the benefit of institutional bargaining in the form of zero-cost EMI.
Other finance options
Credit cards and consumer durable loans also offer the option to convert your purchases into EMIs, but they charge you a processing fee and higher interest rate, which could range from 12 to 20 per cent. This is where EMI cards net you a saving. "They are cheaper than the typical credit card EMIs. EMI cards offer a flexible monthly payment option as a standard feature," says Suresh Sadagopan, founder, Ladder7 Financial Advisories. "No revolving credits in this, unlike a credit card, or converting to EMI, which is also costly. Thus, EMI cards are very attractive for someone with a tight cash flow." If you wish to foreclose other loans, you will have to pay foreclosure charges. However, EMI cards do not charge any fee if you wish to make the full payment midway.
How to get an EMI card
You can apply for the Bajaj Finserv card from the store you are making your purchase from. Pick your product on easy finance by making a down payment and dividing the balance amount into EMIs. When you go for easy finance with the lender, you will be given the option of applying for the EMI card. Once you have paid 3-4 EMIs, your EMI card will be sanctioned and sent to you. Bajaj Finserv also gives consumers the option of applying for an EMI card online.
However, to get the Easy Buy EMI Card from Capital First, you need to be an existing borrower of a consumer durable loan or two-wheeler loan. EMI card providers, such as Kissht, Snapmint and Zest Money, offer the facility to apply for the card online. Once your application is approved, the lender assigns a credit limit against your EMI card, which is dynamic. You can get a credit limit anywhere between Rs 30,000 and Rs 4 lakh, depending upon various factors, including your credit score. You can either use the credit limit to make a single big purchase or can buy multiple times. The repayment is linked to your bank account from where the EMIs are deducted.
The EMI card comes for a nominal joining and annual fee. For instance, Bajaj Finserv charges Rs 412 as one-time joining fee for its Gold EMI Card, and an additional Rs 117 only when you do not use your card for one year. The card gives you a wide shopping range. It can be used in more than 950 cities at more than 43,000 stores. It's not only limited to the purchase of big merchandise. An EMI card also gives you the option of converting your grocery store purchases-typically above a cut-off amount-into EMIs.
Use it judiciously
An EMI card sounds attractive as it frees you from the compulsion of saving to acquire a product. But it makes sense not to go overboard while using it as you will need to be disciplined with repayments in order to keep enjoying the facility in future. "I would advise people using EMI cards to decide what they want to buy and their budget for it before stepping into a store," says Sadagopan. "Once at a store, they should just stick to the product they wish to buy rather than indulge in impulsive shopping."
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