No credit card? Pay shopping EMIs via debit cards

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Garima had to buy a new laptop. Due to lack of enough money, she wanted to make the payment in instalments. But since she didn’t have a credit card, she couldn’t understand how to make the purchase. She started thinking about getting a credit card. When she spoke to her friend Suhani about this, she told her that EMI can also be paid through debit card. Garima became happy after hearing this and started thinking that now shopping can be done and payment will also be done in installments. But not everyone can use the facility of EMI available on debit card. To use this facility, Garima will have to first contact the bank. Apart from this, there are many other aspects that Garima should know about this facility.

So, let’s understand about the EMI facility available on debit card.

First of all, what is it and how does it work?

The bank offers debit card EMI facility to its account holders in the form of pre-approved overdraft facility. The bank makes the payment to the seller on your behalf and instead of billing in one go, you pay in EMIs through the current or savings account linked to your debit card. You can use this facility even if you do not have the full amount in your bank account.

Let us understand this with an example. Suppose you want to buy a laptop worth Rs 70 thousand from an e-commerce site and choose the debit card EMI option with a repayment period of 6 months. After getting approval from the bank and the merchant i.e. that site, Rs 70 thousand will be credited to your bank account. With this, payment will be made directly to that seller i.e. the e-commerce site. Now this Rs 70 thousand and the interest charged on it will be repaid to the bank in 6 monthly installments directly from your bank account.

Regarding this, Amit Kumar Tanwar, co-founder of Finans Corporate Services, says that banks generally provide EMI facility on debit cards only to selected customers. This is done on the basis of the financial strength of the customer as shown by his use of his savings account. Tanwar explains that EMI on debit card is actually a loan facility which is given for specific transactions through online or offline mode. After approval, EMI is debited from the bank account at regular intervals. To use this facility, you may have to pay interest up to 18 percent annually. Generally, purchases up to Rs 5 lakh can be made under this facility. At present, most of the banks are providing this facility to selected customers.

Although there are some advantages and disadvantages of this facility.

First let’s talk about the benefits.

Regarding this, Tanwar says that under this facility, one gets easy access to funds without submitting any document.. You can plan your expenses.. If someone does not use a credit card and does not want to take a loan, this facility is useful for him.

Talking about problems, it is an expensive loan product compared to credit card and personal loan. While interest free period of up to 50 days is available on credit cards and personal loans are available at around 11 percent interest rate…on using EMI facility on debit cards, one may have to pay around 18 percent interest.

Apart from this, this facility also affects your total borrowing capacity i.e. your ability to take loan. This happens when you are paying EMI on debit card especially for more than 1 year and along with this you are taking a new loan.