Gone are the days when consumers used to fret about the cost of an appliance. Indian consumers have always been budget-conscious, while the market is extremely price-sensitive. It wasn’t uncommon for the consumers to baulk at the prices of appliances just a decade ago, and while boomers still haggle over prices, and forgo the opportunity to own the latest models because of the costs involved, the consumer behaviour has changed quite dramatically over the past decade.
This is largely thanks to the proliferation of plastic cards, with debit cards and credit cards becoming ubiquitous among the younger generation. But this change in pattern isn’t just down to the increase in adoption of plastic cards; it also boils down to the benefits they extend.
How EMIs have changed the consumer mindset
Purchasing big-ticket items, at least in the past, was a topic of hot debate, procrastination and careful deliberation about the various aspects involved, and possibly years of premeditated savings and planned investments. If you wanted to purchase a new refrigerator, you would start saving for it months in advance. The burgeoning Indian middle class, and the evolving needs of consumers meant that planned investments just to purchase a new appliance was no longer feasible, and consumers, especially the younger generation started searching for alternatives.
The demonetisation period was crucial in more ways than one, especially in terms of embracing digital payment tools, and their inherent benefits. One of the biggest benefits, as consumers soon found out, of owning a digital card was the ability to break down the total cost of an appliance into easily payable monthly instalments. This is the equated monthly instalment (EMI) payment scheme. Although this was initially possible only through credit cards, financial institutions and e-commerce platforms observed the disparity in terms of penetration between debit cards and credit cards.
This led to two major changes. First, financial institutions started offering what we call ‘EMI cards’, whose biggest benefit, as inferred from the name, is extending the ability to purchase big-ticket items on EMIs. The second change that came about was the banks’ willingness to let people purchase items on EMIs by using their debit cards. This offer was initially provided only to a few cardholders, but over time, more shoppers were able to take advantage of this benefit, and have been able to purchase appliances on EMIs by using their debit cards.
Shopping for a new AC on EMIs without credit cards – Reasons and benefits
While EMIs offer greater convenience, and AC brands allow you to make deferred payments for your purchases, using your credit card to purchase big-ticket items has its own pitfalls. When you use your credit card to make purchases, the total amount you utilize gets blocked, and as you make monthly payments, that specific EMI amount gets released, and your credit limit starts increasing again. This means that your credit utilization ratio, right off the bat, is very high, which negatively impacts your credit score. Furthermore, you won’t be able to use your total credit card limit when you purchase other items on EMIs.
For instance, let us assume that you want to purchase an air conditioner. You’ve been browsing through all the leading AC brands, such as LG, Samsung and Panasonic, and have zeroed in on a model from Hitachi.
Let us now imagine that the Hitachi AC price is around Rs. 40,000, while your total credit card limit is Rs. 50,000. If you have enough credit, which is greater than or equal to Rs. 40,000, you will be able to pay for the new AC in EMIs. However, you aren’t just paying for the air conditioner; the bank also levies interest charges on the purchase, along with processing fees.
This inherently increases the amount you pay for your new AC, and the total amount gets blocked temporarily on your credit card. That is, you won’t be able to use Rs. 40,000 (including processing fees + interest) out of the Rs. 50,000 credit limit. Your credit limit starts increasing every month as you pay the EMIs. However, with debit card EMIs, you won’t have to worry about remembering due dates, or about your credit score getting affected. This is because the money gets debited automatically from your savings account every month, and there won’t be the added inconvenience of a low credit limit.
How you can purchase ACs using EMI cards
Another extremely convenient method of purchasing items on EMIs is by using EMI cards. For instance, the Bajaj Finserv EMI Network Card comes with a pre-approved loan of up to Rs. 4 lakh. This allows you to shop for your favourite Hitachi AC, or an AC from any other top brand without worrying about the costs. If you are worried about the interest rates, then the EMI Network Card allows you to opt for no-cost EMI schemes.
No-cost EMIs allow you to only pay for the appliance, and the financial institution won’t charge additional interest charges or processing fees. This significantly reduces the burden you bear while purchasing big-ticket items on EMIs. For instance, if you are purchasing an air conditioner worth Rs. 60,000, the interest charges would inherently be high. However, with the no-cost EMI option, you won’t have to worry about the interest charges levied on your purchase.
Thus, you can purchase an air conditioner on EMIs even if you do not own a credit card. You can use the Bajaj Finserv EMI Network Card to make the payment in no-cost EMIs, and repay the amount in convenient monthly instalments.