Here’s How Credit Card EMI Purchases Are Calculated


Recently, a user posted on social media about his problem credit card invoicing More specifically, it was about an online purchase made on his credit card in the form of equalized monthly installment (EMI).

The reader said that he bought two items on his EMI credit card from an online shopping portal in October 2022. The purchase was made two days before the end of the billing cycle. The entire amount was debited from his credit card, but in the November 2022 statement, he found that the amount charged in the last statement (October 2022) was refunded, and the transaction became an EMI. In his statement he said that how these entries were accounted for was quite surprising.

Here’s how the Credit Card Billing Cycle works

If you see the terms and conditions credit card upon issuance of the document, then you will realize that the billing cycle is usually monthly for most credit cards in India. So whatever transaction takes place on this date in the billing cycle, it is captured by the credit card issuing bank or others, and then recorded on the credit card statement before it is sent to the cardholder.

This billing date is also known as the summary date or closing date.

Sajish Pillai, managing director and head of strategic assets and alliances, DBS Bank India, says the credit card statement is very comprehensive and includes all purchases, refunds, payments and other debits or credits made to the credit card account within the relevant billing. the cycle

Any new transactions made after the statement date will be included in the following month’s statement.

Another aspect of credit card billing is the payment term cycle. Basically what happens is that a credit card is an unsecured loan, and the company that issues the credit card allows a few days or weeks as an interest-free period to pay off that loan. It is called the payment period, which is the date on which payment is made for a particular credit card statement.

Aditya Soni, founder and CEO of Bengaluru-based credit management platform CheQ, says the billing cycle starts from the day the card is activated, while the interest-free period starts from the day. credit card the invoice is created, and it takes about 45-55 days at most, depending on the issuing bank/entity.

“If you don’t pay the bill within that period, you will have to pay an annual interest of 30-45 percent of the billed amount,” says Soni.

In India, banks generally provide an interest-free period of 20-55 days for credit card bill settlement after the statement due date.

Pillai added: “To avail this benefit, customers should pay the total amount due before the due date. Making installment payments or making late payments may attract interest and late fees.”

For example: Let’s say he has a credit card with a 4 to 3 monthly billing cycle; then the payment period will be from 3 to 20 to 55 days.

Also, if there is no balance from the previous account cycle, there is no interest-free payment cycle. Therefore, new credit card transactions will only be eligible for the interest-free period if the previous bill balance is settled in full.

The Reserve Bank of India (RBI) has recently changed some aspects credit cardsincluding the minimum amount required to avoid negative depreciation.

“The credit card billing cycle is the period when the credit card bill is generated and the credit card billing date is the date the statement is generated. Billing cycles vary by credit card type and credit card provider. For example, a credit card if the billing date is the 5th of the month, the billing cycle would be from the 6th of the previous month to the 4th of the current month. Now, what day is the payment due date before? all outstanding fees must be cleared to avoid penalties. interest-free period or billing period, billing -starts on the first day of the cycle and ends on the payment due date,” said S Anand, CEO and co-founder. , PaySprint, a FinTech company.

What happened to this Credit Card User?

The credit card reader made an EMI purchase with about 2 days remaining in the current credit card statement cycle. So, even though he charged the full amount in the October statement, it was refunded in November, and his EMI was activated.

Says Pillai, “If an individual has purchased an item on the last day of the billing cycle and converts that transaction to an EMI before the statement is generated, the first installment of the EMI would be paid in the next statement.”

S Anand says: Only purchases made after the last day of the billing cycle are counted in the following month’s statement. When he makes a purchase through EMI, the credit card provider blocks the entire purchase amount from his full credit limit. However, there are a few possible scenarios that could play out from now on.

“The first scenario could be that the EMI application is processed in real time and the statement generated on the next day reflects only the decided installment amount, ensuring that the amount payable for this term is only the installment amount. The second scenario could be that there is a delay in the processing of the EMI application and the generated statement reflects the full amount ” added S Anand.

Key takeaways from credit card billing aspects

The time period between the end of the billing cycle and the payment period is an interest-free period, and if the invoice is settled within this period, the card issuing company will not charge interest.

In a credit card EMI transaction, if someone purchases something on or near the last date of the EMI billing cycle, the EMI may be charged in the next statement, but the transaction will be recorded in the current cycle.

Missing a credit card bill payment can hurt one’s credit score, so it should be tracked. In fact, if there was a balance payment since the last statement, this interest-free period would be invalid.

According to S Anand of PaySprint, assuming the credit card statement is generated on September 5th, the credit period is September 5th to October 4th and the payment due date is October 21st. That means it’s the last day. Interest-free payment for transactions between September 5th and October 4th is October 21st. As a result, a transaction made on September 5th will have a 45-day interest-free period, and a transaction made on October 1st will be interest-free. 19 days period.

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