Credit Card:Converting Outstanding amount to EMI/Pay only minimum amount due?Advise

shankar.balan · 7th September 2009, 09:32

credit cards normally LOG a MONTHLY INTEREST of about 3% + 10.3% service taxes - this means if you ROLL OVER your credit, in a year, you end up paying 36% + Interest! It is therefore the most expensive loan you can possibly take!

Therefore try to always use your credit card as a substitute for cash - and always pay up the bill COMPLETELY by the Due Date. Dont ever roll-over credit if possible.

If you do this, you will also earn substantial loyalty points on your credit card which actually converts to excellent value - make your payments on time, use the card as a cash substitute and enjoy yourself with the points you earn - that is a clear gain to you!

To illustrate: Say your total outstanding is Rs 15000/- and you have paid up Rs 14900/- by the due date, you will still have an outstanding balance of Rs 100/- which remains unpaid by the due date of payment.

When the new statement is generated, the bank will charge you the INTEREST due on the entire OUTSTANDING amount of Rs 15000/- DESPITE your having paid Rs 14900/-. This is why, I would suggest, never use the option of Minimum Amount Due. Always pay up in full by your due date.

In case you have big purchases to make, always make them at the beginning of your credit card cycle - this ensures that you get 48 days clear credit, before you have to pay up.

Suppose your card cycle begins on 1st. You can go and buy a new fridge for Rs 25000/- on the same day. By the time your next statement is generated, it will be the 30th/31st of the month - which means you have gained 30 days already. You will also see that from the date of statement generation until the actual DUE DATE for payment, you will have a clear 18 days, within which you will need to make your payment. This system helps you make use of your card to the maximum and use your 2 months salary earnings, to finish off paying for your fridge purchase, at the rate of Rs 12500/- per month. And this way you dont end up paying even Re 1/- towards interest! In effect you have bought the fridge of your choice and have paid for it over 2 instalments through your credit card and have not paid a single rupee on Interest or Processing fee or anything. And, you have enjoyed the use of the fridge over the 48 days that you took to pay up completely, for it!

If you plan to make a big purchase on your card - say a Big LCD TV or something, you can call the bank beforehand, find out if you can convert the charge to EMI's over 6 months and particularly ask about the Processing Fee and Foreclosure fee that they will charge.

They normally charge this processing fee of about 3-4% which enables you to convert the purchase into say 6 months EMI at 0% interest. However, the 3-4% of the total charged amount, effectively is a way of taking some kind of extra money from you in return for the convenience of easy payments.

Also, for info, there are several schemes, wherein the consumer is given the actual benefit of 0% interest, because the company selling the goods and services or the retailer/ dealer, has chosen to pay the "processing fee" on behalf on the consumer, thereby making it easier on the consumer and in order to retain the consumer's loyalty. Take a little time out, study the scenario and then jump - you can get yourself some super-deals just by doing your home-work.

bblost · 7th September 2009, 09:41

Just a warning. CC companies can change your statement dates without warning.
My statement date used to be 9th. I did a transaction of 25k on 11th.
Statement date had changed to 12th.

Luckily had the funds ready to pay in time for billing period.

I have found this works.
Due date; 26.
Statement date: 07

If you are unable to pay by due date, then pay the entire outstanding before the statement date. Entire outstanding as of the statement date. So that you owe 0 Rs to the cc, when the statement is being generated. No interest gets charged.

Fountainheader · 7th September 2009, 09:44

bblost,
Which bank it this ?

ASHISHPALLOD · 7th September 2009, 09:50

Quote:

Originally Posted by spadival

Of course, he was a marwadi

Clever chap but he is not true marwadi because he had not managed moral discipline of finance.
I can say that because i am also marwadi.

Leave aside this part, clever chaps can go through financial mess successfully by luck and little knowledge about system.

benbsb29 · 7th September 2009, 09:55

Quote:

Originally Posted by shankar.balan

To illustrate: Say your total outstanding is Rs 15000/- and you have paid up Rs 14900/- by the due date, you will still have an outstanding balance of Rs 100/- which remains unpaid by the due date of payment.

When the new statement is generated, the bank will charge you the INTEREST due on the entire OUTSTANDING amount of Rs 15000/- DESPITE your having paid Rs 14900/-. This is why, I would suggest, never use the option of Minimum Amount Due. Always pay up in full by your due date.

The part in bold is exactly what happened to me, and this was on a mobile phone purchase. To add insult to injury then, i was also charged processing fee since i used a credit card for a mobile phone purchase.

bblost · 7th September 2009, 10:16

Quote:

Originally Posted by Fountainheader

bblost,
Which bank it this ?

ICICI Platinum Card.

No warning no intimation nothing.

I look at my statement and then realize that the date has changed.
I should have checked if my statement was generated before I did the transaction. Then I would have used a different card.
But who does that.

Fountainheader · 7th September 2009, 10:54

Quote:

Originally Posted by bblost

ICICI Platinum Card.

No warning no intimation nothing.

I look at my statement and then realize that the date has changed.
I should have checked if my statement was generated before I did the transaction. Then I would have used a different card.
But who does that.

Don't you get a message that your statement has been generated ? I get an sms/email for the same. But then ICICI has never been a customer-friendly bank

Fordmanchau · 7th September 2009, 11:03

Quote:

Originally Posted by Spitfire

I would pay the interest or go the EMI route whatever maybe the loss, instead of asking money from friends or relatives.

Take it as a lesson and never overspend ever again.

I mentioned the options in order of least cost incurred to pay off the dues.Yes, even if you borrow from friends/relatives , you do have to pay them back, but mostly then you don't have to pay interest to your relatives/friends. Some people have better support from friends/relatives and some does not. So depending on your situation, you can borrow from them.

Quote:

Originally Posted by bblost

Balance transfer. and stop using the card to which you transfer the amount

Balance transfer is good option as well. I have utilised it many times but even this has a pre-payment charges.

Quote:

Originally Posted by spadival

Aren't there any banks in India who offer 3-6 months 0% interest on balance transfer?

ICICI bank cards have 3 months ZERO Interest offer generally on balance transfer or on conversion of your transaction to EMI.Some other banks like Citibank and HDFC also offer 3 months interest free period. Practically EMI option and Balance transfer options carry identical charges.

Red Circle · 7th September 2009, 11:42

I would suggest to opt for EMI because you will know that how much interest you will end up paying but incase you are making a monthly minimum payment you cannot calculate how much interest you will be paying and it will be much higher than the EMI. Incase of monthly minimum payment the interest is calculated from the date of purchase on the entire balance above that service tax aswell.

ashwinsid · 11th September 2009, 11:21

First of all Thank You all for your kind replies. This is the only forum where members are ready to help no matter what the query is.

Now to the topic. Problem solved!

I managed to pay the whole amount without EMI or any other things. When I posted my query, I was sure I wont be able to manage the amount this month. But I could.

Even I do not want to go for EMI or any such thing with Credit Cards. One has to be extremely careful and that is why I wanted some experiences of the members here in dealing with EMIs.

And many of you have advised me on controlled spending. Thanks for the advise guys. I never overspend and whenever I swipe, I check if I have that much cash to repay. I consider credit card to be a convenience and not a necessity. Only this time there was a small confusion.

So thanks again and the same message to other credit card holders: Do anything possible to avoid EMI /dues with credit card.

ASHISHPALLOD · 11th September 2009, 13:25

Quote:

Originally Posted by ashwinsid

Now to the topic. Problem solved!

I managed to pay the whole amount without EMI or any other things.

GOOD.

na rahega baans na bajegi bansuri.

saap bhi mar gaya aur laathi bhi na tuti.

mobike008 · 11th September 2009, 15:24

Quote:

Originally Posted by ASHISHPALLOD

na rahega baans na bajegi bansuri.

saap bhi mar gaya aur laathi bhi na tuti.

Exactly, always spend money on credit card that you know can be paid off the next month.

Never get stuck in the carry forward business, this is a well plan trap laid by the CC company.

For bigger purchases plan in advance check the EMI option and do the math and see if it works out and then go ahead and buy that desired product.

Anyways, i always pay the CC bill in complete be it 5K or 30K, been following this practice since over a decade

7th September 2009, 09:32	#16
shankar.balan BANNED Join Date: Apr 2008 Location: Bangalore Posts: 11,797 Thanked: 27,229 Times View My Garage Infractions: 0/3 (13)	credit cards normally LOG a MONTHLY INTEREST of about 3% + 10.3% service taxes - this means if you ROLL OVER your credit, in a year, you end up paying 36% + Interest! It is therefore the most expensive loan you can possibly take! Therefore try to always use your credit card as a substitute for cash - and always pay up the bill COMPLETELY by the Due Date. Dont ever roll-over credit if possible. If you do this, you will also earn substantial loyalty points on your credit card which actually converts to excellent value - make your payments on time, use the card as a cash substitute and enjoy yourself with the points you earn - that is a clear gain to you! To illustrate: Say your total outstanding is Rs 15000/- and you have paid up Rs 14900/- by the due date, you will still have an outstanding balance of Rs 100/- which remains unpaid by the due date of payment. When the new statement is generated, the bank will charge you the INTEREST due on the entire OUTSTANDING amount of Rs 15000/- DESPITE your having paid Rs 14900/-. This is why, I would suggest, never use the option of Minimum Amount Due. Always pay up in full by your due date. In case you have big purchases to make, always make them at the beginning of your credit card cycle - this ensures that you get 48 days clear credit, before you have to pay up. Suppose your card cycle begins on 1st. You can go and buy a new fridge for Rs 25000/- on the same day. By the time your next statement is generated, it will be the 30th/31st of the month - which means you have gained 30 days already. You will also see that from the date of statement generation until the actual DUE DATE for payment, you will have a clear 18 days, within which you will need to make your payment. This system helps you make use of your card to the maximum and use your 2 months salary earnings, to finish off paying for your fridge purchase, at the rate of Rs 12500/- per month. And this way you dont end up paying even Re 1/- towards interest! In effect you have bought the fridge of your choice and have paid for it over 2 instalments through your credit card and have not paid a single rupee on Interest or Processing fee or anything. And, you have enjoyed the use of the fridge over the 48 days that you took to pay up completely, for it! If you plan to make a big purchase on your card - say a Big LCD TV or something, you can call the bank beforehand, find out if you can convert the charge to EMI's over 6 months and particularly ask about the Processing Fee and Foreclosure fee that they will charge. They normally charge this processing fee of about 3-4% which enables you to convert the purchase into say 6 months EMI at 0% interest. However, the 3-4% of the total charged amount, effectively is a way of taking some kind of extra money from you in return for the convenience of easy payments. Also, for info, there are several schemes, wherein the consumer is given the actual benefit of 0% interest, because the company selling the goods and services or the retailer/ dealer, has chosen to pay the "processing fee" on behalf on the consumer, thereby making it easier on the consumer and in order to retain the consumer's loyalty. Take a little time out, study the scenario and then jump - you can get yourself some super-deals just by doing your home-work. Last edited by shankar.balan : 7th September 2009 at 09:37.
	() Thanks

7th September 2009, 09:41	#17
bblost Team-BHP Support Join Date: Jul 2007 Location: Hyderabad Posts: 11,295 Thanked: 17,979 Times View My Garage	Just a warning. CC companies can change your statement dates without warning. My statement date used to be 9th. I did a transaction of 25k on 11th. Statement date had changed to 12th. Luckily had the funds ready to pay in time for billing period. I have found this works. Due date; 26. Statement date: 07 If you are unable to pay by due date, then pay the entire outstanding before the statement date. Entire outstanding as of the statement date. So that you owe 0 Rs to the cc, when the statement is being generated. No interest gets charged.
	() Thanks

7th September 2009, 09:44	#18
Fountainheader Senior - BHPian Join Date: Feb 2008 Location: Silicon Valley Posts: 1,501 Thanked: 13 Times View My Garage	bblost, Which bank it this ?
	() Thanks

7th September 2009, 11:42	#24
Red Circle BHPian Join Date: Jan 2009 Location: Bangalore Posts: 74 Thanked: 16 Times	I would suggest to opt for EMI because you will know that how much interest you will end up paying but incase you are making a monthly minimum payment you cannot calculate how much interest you will be paying and it will be much higher than the EMI. Incase of monthly minimum payment the interest is calculated from the date of purchase on the entire balance above that service tax aswell.
	() Thanks

11th September 2009, 11:21	#25
ashwinsid BHPian Join Date: Feb 2008 Location: Bangalore Posts: 185 Thanked: 40 Times	First of all Thank You all for your kind replies. This is the only forum where members are ready to help no matter what the query is. Now to the topic. Problem solved! I managed to pay the whole amount without EMI or any other things. When I posted my query, I was sure I wont be able to manage the amount this month. But I could. Even I do not want to go for EMI or any such thing with Credit Cards. One has to be extremely careful and that is why I wanted some experiences of the members here in dealing with EMIs. And many of you have advised me on controlled spending. Thanks for the advise guys. I never overspend and whenever I swipe, I check if I have that much cash to repay. I consider credit card to be a convenience and not a necessity. Only this time there was a small confusion. So thanks again and the same message to other credit card holders: Do anything possible to avoid EMI /dues with credit card.
	() Thanks