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How Safe Are No-Cost EMI Plans On Credit Cards?

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How Safe Are No-Cost EMI Plans On Credit Cards?

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Thanks to the burgeoning e-commerce marketplaces in India, most of us have come across no-cost EMI plans on credit cards. They help us purchase those top-tier products from big brands - and not pay additional interest thanks to the bank offers. 

In a 2013 RBI circular, the central bank explains that the concept of 0% interest is nonexistent. Therefore, users must understand that this is a subtle marketing ploy. In essence, the interest cost, in one way or the other, falls to them. But is using a no-cost EMI smart? Is it safe to use? Read on to find out!

How No-Cost EMI Works on Credit Cards

You are not required to pay extra interest on the principal amount if you choose a no-cost EMI option. You pay nothing more than the actual cost of the goods in convenient monthly instalments (EMIs). 

Instead, e-commerce platforms like Amazon India and Flipkart provide no-cost EMI plans with interest (typically 15%), but that's added elsewhere. 

Let's assume you want to buy a smartphone for Rs 30,000. If you select a three-month, interest-free EMI plan with a 15% interest rate, you will be required to pay Rs 4,500 in interest. Now, depending on the offer, there are usually two plans:

When the discount is equivalent to interest 

Discount offered: Rs 4,500

Offer price for phone: Rs 25,500 

Amount to be paid as interest for EMIs over 3 months: Rs 4,500 

Effective cost: Rs 30,000

When the interest amount is added to the product price 

Phone cost: Rs 30,000

Interest to be paid as EMI: Rs 4,500

Zero-cost EMI offer price: Rs 34,500

Total amount you need to repay as EMIs: Rs 34,500

In this instance, the financing bank receives the interest payment, and the store receives the remaining funds. 

Benefits of No-Cost EMI

  • Enables an improvement in living by allowing the purchase of pricey items in monthly instalments.
  • Zero-interest EMI is now available for additional products - including furniture, cosmetics, tour plans, as well as formerly high-ticket items like cellphones, washing machines, and computers.

Is No-Cost EMI Good? What are the Disadvantages?

  • Clients can wind up paying significantly more than they would have if they had paid in cash.
  • A no-cost EMI may lead to impulsive purchases.
  • Missed EMI payments may result in a lower credit score.

No-Cost EMI: Pros & Cons

Pros Cons
You can purchase a product without being required to pay the whole price For EMI processing, some banks may impose a set, non-refundable fee
You may feel less bothered if you make convenient EMI payments The payable interest has to be paid with GST
It gives you the freedom to select the tenure per your monthly budget You would still incur interest costs even if you return the item and receive a refund.

How to Avail No-Cost EMI on Credit Cards For Online Shopping?

  1. Choose the product that you want to purchase.
  2. Find out if there are any free EMI choices for that specific product.
  3. Consider all the various payment alternatives if the product provides EMI options for buying.
  4. On the payment page, choose the EMI option you believe best fits your financial situation.
  5. Input your credit card information, including the card name, card number, expiration date, and CVV number.
  6. Once you checkout, the principal amount will be blocked on the credit card.
  7. You will receive a detailed breakdown of the payment information on your registered email address.

Procedure to Avail No-Cost EMI on Credit Cards When Shopping Offline

  1. Choose the EMI option you want to use after deciding on the purchase. Retail stores offer three, six, nine, and twelve-month EMI periods.
  2. Fill up a form by providing your name, address, phone number, the EMI option you want to use, and your signature.
  3. Along with the form, you will also be required to send copies of one form of identification and one form of address verification.
  4. Once the paperwork is completed, you can take the product home.

Difference Between No-Cost EMI & Regular EMI

With a regular EMI, the EMI amount would consist of the processing fees and the interest component. The difference when it comes to no-cost EMI is that there is no interest component taken into account.

No-Cost EMI on Credit Cards: Things to Remember

By receiving an additional discount, you are getting a fantastic deal. But, you should only go ahead with the purchase if no-cost EMI on a credit card is a suitable alternative. Opt for it, if:

  • You lack the funds necessary to make the initial payment
  • You wish to purchase something expensive
  • You want to use short-term loans to establish your credit history


Today, almost everything can be purchased with the no-cost EMI option on credit cards. Yet, as mentioned above, it has its advantages & disadvantages. Bottom line - if you cannot pay the EMIs conveniently, it would be ill-advised to opt for no-cost EMI on credit cards - especially since most retail stores and e-commerce platforms provide free EMI choices. 

Frequently Asked Questions

1. What does no-cost EMI mean?

With this payment option, buyers can purchase expensive things online and pay in monthly instalments rather than the total amount. Although it's simpler to spread the payment over a few months rather than all at once, the buyer pays more than the product's actual price.

2. How can I get a no-cost EMI?

To avail of no-cost EMI, contact your bank and go through the procedure as per the instructions. 

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