Minimum Payment Trap Visualizer
Paying only the "Minimum Amount Due" (usually 5% of the outstanding balance) is a debt trap. See what happens if you pay the minimum vs. converting to this EMI plan:
Worked Example: Credit Card EMI Conversion Cost
Suppose you purchase a laptop worth ₹60,000 on your credit card and convert it to a 6-month EMI at an interest rate of 15% p.a., with a 1% processing fee:
- Processing fee (upfront cost) = ₹60,000 × 1% = ₹600
- Monthly EMI payment = ₹10,442 / month
- Total interest paid over 6 months = ₹2,652
- Effective price of laptop = ₹60,000 + ₹600 + ₹2,652 = ₹63,252
Converting the transaction to EMI costs an extra ₹3,252 in interest and fees.
Credit Card EMI Conversion Formulas
The monthly installment is computed using the reducing balance method:
Where:
- P = Principal amount converted
- r = Monthly interest rate (Annual rate / 12 / 100)
- n = Number of monthly installments (Tenure in months)
Additionally, credit card processing fees are computed as:
Note: In India, a standard GST of 18% is also levied on the processing fee and interest amount, which is reflected in your bank statements.
Monthly Card EMI Repayment Schedule
| Month | Opening Balance | EMI Payment | Principal Repaid | Interest Charged | Closing Balance |
|---|
Frequently Asked Questions
Yes. Under GST rules in India, an 18% Goods and Services Tax is applicable on both the credit card interest amount charged every month and the upfront processing fee. This tax is billed separately on your credit card statement each month.
Yes, you can prepay or foreclose a credit card EMI. However, banks usually levy a foreclosure charge ranging from 2% to 3% of the outstanding principal balance. The remaining interest is saved, but processing fees are not refunded.