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Understanding the Differences Between a Revolving and Installment Credit Account for Indian Expatriates

01 Aug 2023


According to a report by NDTV, the Indian diaspora is the biggest worldwide with over 18 million Indian migrants living in foreign countries to earn a living. They send money to India to offer financial aid to their families back home. When transferring money across borders, understanding different types of accounts is critical. Do you know the difference between a revolving and installment credit account? Don’t worry if you don’t already know about it; the following article will explain the difference between the two and inform you about the best possible way to transfer funds to India from overseas.


A Look at Remittances to India from Abroad.

The Indian diaspora is making a significant contribution to the country’s economy through inward remittances they send back.

Nirmala Sitharaman is an Indian Union Finance Minister. An NDTV report recently quoted her as saying that the Indian diaspora sent back $100 billion in inward remittances, in 2022. This has helped the country retain its position as the world’s leading recipient of remittances.


The Indian migrants travel abroad to find jobs with better financial prospects that they cannot find in their native country. Because India has just surpassed China as the world’s most populous country with over 1.4 billion people, according to a report by The Economist, which sourced its data from the UN.

On finding jobs abroad, the bigger question is to find a way for sending funds back home. It is quite challenging given the abundance of options to choose from.

But do you know which option you find the most handy, accessible and convenient?


Well, if it is said that such an option is a Credit card, will it be wrong?


You may think about many other options including banks and online money transfer companies, but credit cards serve you as a sort of one-stop solution for your financial issues. These issues include shopping online, getting loans, paying back the money gradually without getting financially burdened, and transferring funds online.


There are two major credit card types that you can use for your financial needs. And both have positives and negatives attached to them.


Do you know what those two different credit card types are?


Well, these are a revolving credit card and an instalment credit card.

This blog aims to discuss and explain both credit card types and differentiate between them for your better understanding.


It will help you make an informed decision about whether to use one for a money transfer to India, for online shopping or any other purpose.


Suppose you wish to use a credit card for transferring funds, you must know if there is any limit on credit card transfers, or if you can only have numbered money transfers.


Let’s first understand a credit card.


A Credit Card – Understanding the Basics

A credit card is a thin plastic or metal rectangular card that a bank or a financial institution issues. It allows you to borrow funds from the issuing authority, with which you shop online and make payments to merchants who accept payments through these cards.


Although you can easily borrow money which you return over some time under some agreed terms and conditions, these apply some interest. And you have to pay back the money including the interest on certain terms and conditions mutually agreed upon between you and the financial institution.


Credit cards typically charge a higher interest rate than other cards but the following credit card types can help you with high interest rates.

 

Common Types of Credit Cards

The following credit card types are commonly used.


Reward Cards

These cards are the most common. These give you something back after your purchases, like cash back or points towards a flight.

 

Low-Interest Cards

These cards charge you low interest and at times zero interest for an initial period.

 

Student Cards

These cards are meant for students only who have no credit history.


Let’s now understand the revolving and instalment credit cards.

 

Understanding a Revolving Credit Card and an Instalment Credit Card

Both of these credit card types allow you to finance your purchases. But how you receive money and terms differ. Let’s understand them separately.

 

Revolving Credit Account

A revolving credit account allows you to borrow money repeatedly according to a preapproved limit to repay the money over time.

The financial institution sets a credit limit up to which you borrow money, after accepting your revolving credit card account. You can pay off the balance in full or make minimum payments or choose a different payment amount.

 

Instalment Credit Account

An instalment credit account allows you to borrow money in full and pay it back in a fixed amount through monthly instalments. This is regulated by the mutually agreed upon terms and conditions.

Personal loans, mortgages, and auto loans are all common types of an instalment credit account.

You can use any of the credit cards in case you have to send money to India online by borrowing money from the issuing authority in a financial emergency.


Let’s now list the pros and cons of each.


The Pros and Cons of Revolving and Installment Credit Accounts

 

Pros of a Revolving Credit Account

  • You borrow the exact amount you need
  • When you pay the money back, it is available to use again
  • You pay interest only on the balance you carry over
  • Access to funds is quick and easy
  • You can borrow bigger amounts to fund big projects

Cons of a Revolving Credit Account

  • Your lender gives you a fixed credit limit up to which you can borrow
  • With a higher revolving balance, you will pay a higher interest rate
  • The temptation to overspend with revolving credit is hard to resist

Pros of an Instalment Credit Account

  • You get a fixed amount in a lump sum
  • You pay it off in easy instalments
  • You do not have to speculate about the interest rate as it is fixed
  • The payment you have to make back to the lender is fixed
  • Payment terms and conditions are easy and flexible

Cons of an Instalment Credit Account

  • Some financial institutions will charge you an additional amount as fees added on top of the money you borrow
  • Missing out on a payment or making a delayed payment can damage your credit
  • There is no flexibility on payments as the payment terms and conditions are pretty rigid

After looking at the pros and cons of each one separately, you are now better positioned to decide which one to choose. Right?

 

Wrapping Up the Discussion

Although credit cards are suitable for online shopping and other purposes explained above, they are not perfect for your online money transfer to India because of the costs involved. For sending money back to India, try choosing a service provider that offers you speed, safety, live and market-competitive exchange rates, and much more from one stop and that too in exchange for a low fee to help you save and send more to those financially dependent on you.


FAQs


What is a revolving credit account?

Through a revolving credit account, you can borrow money from the lender according to a fixed limit, the lender has set. You have the liberty to pay back the amount in full or minimum payments or choose a different payment amount.

 

What is an instalment credit account?

Through an instalment account, you can borrow money in full from your lender. But payment will be made through monthly instalments for which the amount is fixed.

 

Which of these credit cards should Indian migrants use?

Using any of these credit cards or others such as reward cards, student cards or low-interest credit cards only depends on the needs of the users. So, first, determine your exact needs and then choose a corresponding credit card. 

 

Are credit cards suitable for online money transfers?

Although many migrants still use credit cards for online money transfers, they are not a perfect fit for doing so except in emergencies, in which you can borrow money and transfer it, if needed.

 

What is a better alternative for sending money across borders?

You can have many alternatives such as banks and online money transfer companies for sending money online. Try to find a service provider that charges you a low fee, and offers competitive exchange rates with other benefits like safety, speed, and convenience.

Resources

  • Indian diaspora

(At 18 Million, India Has The World's Largest Expatriates Population (ndtv.com)

  • Inward remittances

($100 Billion Received In Remittances From NRIs In 2022: Nirmala Sitharaman (ndtv.com)

  • Indian population

(India’s diaspora is bigger and more influential than any in history (economist.com)


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