Understanding EMI: Automatic Debit and Payment Procedures

This guide seeks to clarify the mechanics behind Equated Monthly Installments (EMIs), specifically focusing on whether EMI payments are automatically debited from your account. We will explore the process, the importance of keeping sufficient funds in your account, and how different payment methods, such as credit cards, handle EMIs.

What is EMI and How Does it Work?

EMI stands for Equated Monthly Installment, which is a fixed amount paid by a borrower to a lender over a specified period. This monthly payment typically covers both the principal amount and the interest due on a loan.

EMI payments are often set up as automatic debits from the borrower's bank account. This automatic debit feature helps ensure that payments are made on time and without the need for manual intervention. However, it’s essential to check the terms and conditions with your lender, as policies may vary.

Ensuring Sufficient Funds for Automatic Debit

When an EMI is scheduled to be debited automatically, it’s crucial to keep a sufficient amount in your account to avoid any bouncing charges. These charges can be imposed by the bank if the loan amount exceeds the available balance in your account.

For HDFC debit card EMI payments, make sure you have enough funds in your account by the due date. The payment will be automatically deducted from your debit card at that time.

EMI in Credit Cards

For credit card EMI payments, the process is slightly different. Unlike bank accounts or debit cards, credit cards are not always associated with a specific bank account. Consequently, you need to ensure that the credit card bill and the EMI payment are made separately.

EMI on a credit card account is debited to your card account on the statement issuing day. This includes breaking down into three components:

Principal amount component Interest component 18% GST on the interest component (3rd component)

The GST component is generally levied during the next billing cycle and appears on the first day of the next billing cycle. If you have opted for a six-month EMI, the GST on your final interest component will appear in the statement as the first entry in the subsequent month’s billing cycle.

After the EMI is debited, you can proceed to pay your credit card bill as usual.

Setting Up Automatic Debit Without a Prior Authorization

In some cases, you can choose to make your EMI payment automatically via your bank account, even without prior authorization. This is accomplished through Automatic Cash Management (ACH) debit, which involves providing the company with your banking routing number and account number in advance. If you have provided this information, the EMI will be deducted from your checking or savings account on the due date.

If you request that the installment be automatically debited, the payment will typically come out on the due date, provided you have the necessary information in your account.

Conclusion

Understanding the mechanics of EMI payments, including automatic debits, is crucial for maintaining a smooth repayment process. Whether you are managing an EMI through a bank account, a credit card, or other means, keeping a sufficient balance and being aware of the steps involved can help prevent any delays or additional costs.

_xlabel