EMI schemes is back on credit cards
Posted on: 02/May/2014 10:01:07 AM
It is cheerful news for those who have credit cards since the EMI scheme is now back. The success of easy payment options, where consumers pay for credit card purchases through monthly installments, is now being extended from electronics and consumer durables to newer segments such as education, holiday packages and insurance. A big driver is turning out to be online sales, where loans are sanctioned without manual interventions and monthly installments are reflected in credit card bills. Not only are banks recovering lost ground after RBI barred them from providing ‘zero percent’ EMI schemes, they have added new segments, including educational institutions. Very soon, consumers may also be able to pay their health and motor insurance premiums through monthly EMIs, thanks to this facility.
There has been a big revival in what the card industry describes as the ‘EMI at PoS’ business — PoS stands for point-of sales terminal or the credit card swipe machine. EMI at PoS had peaked in the first quarter of last year after some manufacturers and retailers offered 0% interest EMI schemes for their products. This was possible as the retailer or manufacturer subsidized the interest cost. However, this business was hit following the RBI ban on ‘zero percent’ EMI. RBI’s reasoning was that the product was misleading and could result in consumers buying goods they could not afford. Besides not requiring any documentation, the advantage of EMI at PoS is that interest rates are a third of what is charged when a cardholder chooses to revolve his balance. Banks are happy to provide such schemes as they are assured much higher volumes
