You bought a ₹1.2 lakh laptop on your credit card. The issuer sends a notification offering to convert it into a 12-month EMI at "just 14% per annum". A personal loan from the same bank is available at 11%. Which do you take?
The flat rate trap
Credit card EMI rates are typically quoted as flat rates, not reducing balance rates. A 14% flat rate on a 12-month EMI is actually equivalent to about 25–26% on a reducing balance basis. That's much more expensive than a personal loan at 11% reducing balance.
Processing fees
Card EMIs usually include a processing fee of 1–3% of the principal. Personal loans have processing fees too (1–2%), but you need to add this to the comparison for an apples-to-apples view.
Pre-closure
Card EMIs often have steep pre-closure charges (3% of outstanding) and don't always refund the interest saved. Personal loans typically allow pre-closure after 6 months with lower charges.
Where card EMI wins
For small amounts (under ₹25,000) and short tenors (3–6 months), card EMIs are convenient and fast. No paperwork, no credit check beyond what the issuer already has on you. The rate gap matters less on small amounts over short durations.
The right call
For purchases above ₹50,000 and tenors longer than 6 months, a personal loan is almost always cheaper in total cost. For impulse buys under ₹25,000 that you'll clear in 3 months, card EMI is fine. In between, do the actual math with the reducing balance rate, not the flat rate.
No-cost EMI is the best option
Many merchants offer true no-cost EMI where the issuer absorbs the interest. If the product is available at no-cost EMI directly (common on Amazon, Flipkart, retail electronics stores), that's strictly better than both card EMI conversion and personal loans. Read the fine print — some "no-cost" EMIs hide the interest as an upfront discount foregone.