Understanding Flipkart's Credit Card EMI Option and Credit Limit Impact

Flipkart, a prominent e-commerce platform, offers customers the flexibility to make purchases via Equated Monthly Installments (EMIs) through its credit card EMI service. This guide aims to explain the workings of this service, the eligibility criteria, and how it might affect your credit card limit if you exceed your credit limit during a purchase.

How Flipkart's EMI Option Works

Eligibility: To use Flipkart's EMI option, you must hold a compatible credit card from one of the partner banks. These banks collaborate with Flipkart to facilitate this installment option.

Product Selection: During your shopping on Flipkart, you can identify EMI-eligible products. These are usually marked on the product page. When you select a product, the EMI option will appear during the checkout process.

EMI Option: You can choose the duration of the EMI, typically available as 3, 6, 9, or 12 months, depending on the specific product's availability.

Processing Fee: Some banks may charge a processing fee for converting the purchase into EMI. This fee can vary based on the bank and the product.

Interest Rates: Interest rates for EMI payments can vary based on the bank and the specific credit card. Promotional offers may allow zero-interest EMIs, while others may charge interest.

Approval: After selecting the EMI option, you will need to provide your credit card details for verification. Once approved, the amount is automatically divided into monthly installments that are debited from your credit card account.

Repayment: The total purchase amount will be divided into equal monthly payments. You can track these payments through your bank's app or website, as well as on Flipkart's order history.

What Happens When You Exceed Your Credit Limit?

Understanding the impact of an overlimit transaction on your credit card requires an explanation of two key concepts: credit limit and overlimit transactions.

Overlimit Transaction

A credit card's credit limit is the maximum amount you can spend using the card. For example, if your credit limit is 19,000, the total amount you can spend, including EMIs, principal, interest, and other charges, must not exceed this limit.

In an overlimit transaction, you make a purchase that exceeds your credit card limit. This can lead to several outcomes, as explained below:

Why You Exceeded Your Credit Limit

You made a payment of 61,000, which is much higher than your 19,000 credit limit. The bank will treat this as an overpayment. Typically, in such cases, the bank contacts the customer for a refund of the excess amount. However, if the bank does not initiate this process, the excess payment will not be added to your credit limit.

Your credit limit remains unchanged, and the excess payment acts as an advance for future purchases. Even if you convert a transaction into EMI, it does not affect the credit limit.

Mechanism Behind Exceeding the Limit and EMIs

When you convert a transaction into EMIs, the bank blocks the credit limit equal to the full amount of the transaction. Instead of demanding the full payment in one statement cycle, they now demand payment in multiple installments. The credit limit remains blocked, and you cannot use it until the EMIs are paid.

The 61,000 overpayment was treated as advance payment for the future EMIs. Therefore, even though you made a purchase of 80,000, the bank approved the transaction and converted it into EMIs. The 61,000 overpayment is used as the advance payment, resulting in interest being charged on an already paid amount.

Conclusion and Advice

Understanding the mechanics of Flipkart's EMI option and the impact of overlimit transactions is crucial to managing your credit card effectively. Always check your credit limit before making large purchases and consider the terms and conditions associated with EMI options.

For detailed financial advice and to avoid such issues in the future, consult your bank or financial advisor.