Imagine you've just purchased your dream gadget using your credit card's EMI option. Months later, you receive a windfall - perhaps a bonus or a tax refund. Did you know you could foreclose your credit card EMI? This smart financial move can save you money and boost your credit score.
Steps to foreclose your credit card EMI
A credit card EMI foreclosure is simpler than you might think. First, contact your credit card issuer through their customer service hotline or via their mobile app. Request the outstanding balance on your EMI purchase. The representative will provide you with the exact amount needed to clear your debt, which may include a nominal foreclosure fee.
Once you have the figure, you can make the payment through various channels - net banking, mobile banking, or even at a bank branch. After the payment is processed, your EMI will be marked as foreclosed. Always ensure you get a confirmation of the foreclosure to avoid any future discrepancies.
Benefits of foreclosing your credit card EMI
- Interest savings: By foreclosing your EMI, you avoid paying interest for the remaining months. This can result in significant savings, especially if you're in the early stages of your EMI tenure.
- Improved credit utilisation: Foreclosure reduces your credit utilisation ratio - the amount of credit you're using compared to your limit. A lower ratio can positively impact your credit score, making future loan approvals easier.
- Debt freedom: Clearing your EMI frees up your credit limit, allowing you to make new purchases or handle emergencies without the burden of existing debt.
- Mental peace: Being debt-free brings psychological relief. You'll sleep better knowing you don't have EMIs hanging over your head.
- Flexibility for future loans: Lenders view applicants with fewer ongoing EMIs more favourably. Foreclosure can improve your chances of securing better terms on future loans.
- Cash flow management: Without EMIs, you have more disposable income each month. This can be channelled into savings, investments, or other financial goals.
- Avoid late payment risks: Life can get hectic, and you might miss an EMI payment. Foreclosure eliminates this risk and the associated late fees or credit score hits.
- Strategise big purchases: With an improved credit score and limit, you can plan bigger purchases like a car or home appliances more effectively.
- Tax benefits: In some cases, the interest paid on EMIs may not be tax-deductible. Foreclosure can help optimise your tax liabilities.
- Financial discipline: Successfully foreclosing an EMI instils a sense of financial discipline, encouraging smarter money management in the future.
Potential drawbacks of EMI foreclosure
- Foreclosure fees: Some banks charge a fee for foreclosing EMIs. While often nominal, it's an additional cost to consider.
- Impact on cash reserves: Using a large sum for foreclosure might deplete your emergency fund or savings meant for other goals.
- Complexity with multiple EMIs: If you have several EMIs on one card, foreclosing one might get complicated. Always double-check which EMI is being foreclosed.
- No credit score boost for timely payments: Consistent, timely EMI payments can boost your credit score. Foreclosure means missing out on these regular score bumps.
- Psychological spending trigger: The act of foreclosure might give a false sense of financial security, leading to increased spending.
- Opportunity cost: The money used for foreclosure could potentially earn higher returns if invested elsewhere, especially if your EMI interest rate is low.
Speaking of smart financial moves, have you considered the Bajaj Finserv RBL Bank Credit Card? Specifically designed for the discerning consumer who values flexibility and savings, this co-branded credit card offers features that align perfectly with diverse needs.
Bajaj Finserv RBL Bank Credit Card benefits
One of the many benefits that the Bajaj Finserv RBL Bank Credit Card variants offer is the ability to convert large purchases of Rs. 2,500 or more into easy, manageable EMIs. And yes, you can foreclose these EMIs too, for no more than 3% of the outstanding principal amount.
Other advantages include:
- Save on fuel purchase with a surcharge waiver of up to Rs. 1,200 a year at any station nationwide.
- Earn redeemable reward points on almost every expenditure.
- Depending on whether you meet the minimum spending requirement per your card variant, your annual fee may be waived off.
- Enjoy complimentary access to airport lounges in India.
- Interest-free cash withdrawal from any ATM across the country for up to 50 days.
- Free movie ticket every month via BookMyShow.
- Discounts on dining and travel bookings, and cashback on transport, groceries, and fuel purchases.
Beyond just making purchases, a Bajaj Finserv RBL Bank Credit Card helps you save smarter and stay in control of your financial journey. If you’re ready to experience this blend of flexibility, savings, and control, apply today for the Bajaj Finserv RBL Bank Credit Card.
