Why Converting to EMI is Crucial
- The Revolving Debt Trap: If you do not pay your full credit card bill, the bank shifts your balance to "revolving credit". The interest rate on this is typically 3.5% to 4% per month (which compounds to a devastating 42% to 50% per year).
- The EMI Hack: By converting the outstanding balance into an EMI, you force the bank to drop the interest rate from 42% down to 14-18%. This instantly stops the aggressive compounding.
- Loss of Grace Period: Remember, the moment you convert a balance to an EMI or carry over a balance, you lose your interest-free grace period (the 45-50 days) on all new purchases. It is highly recommended to stop using the card entirely until the EMI is fully paid off.