Have you been planning to buy your dream phone or a refrigerator that you are eyeing for quite a long time? What if you can’t afford it now but don’t mind paying for over 6 months? Well, No Cost EMI or Zero Cost EMI offered by several banks via credit cards allows you to buy the products of your choice on major online platforms scuh as Amazon, Flipkart, Myntra, etc. Let’s a take look at everything you need to know about no-cost EMI on credit cards.
Key Highlights
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What is No Cost EMI on Credit Cards?
No Cost EMI means that you do not need to pay additional interest on the principal amount. You only pay the actual price of the product in easy monthly installments(EMIs) at no added cost whatsoever.
How does No Cost EMI on Credit Card Work?
No Cost EMI does not come with an interest factor, unlike the regular EMI option. Let us understand the concept of no-cost EMI through an example.
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No Cost EMI Plan |
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EMI Plan |
Rs. 10,000x 3m |
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Interest(p.a.) |
Rs.638 (13%) |
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Discount |
Rs. 638 |
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Total Cost |
Rs. 30,000 |
- Once the order is placed, the discounted amount will be paid to the bank-Rs. 29,362 (Rs. 30,000-Rs. Rs. 638)
- The amount will be reversed by the bank within 4-7 working days and converted into EMI plan
- You will have to pay Rs. 10,000 every month for a period of 3 months
This is how your monthly statement will look like:
| Monthly Installment | Interest | Principal |
| 1st EMI (Rs. 10,000) | Rs. 318 | Rs.9,682 |
| 2nd EMI (Rs. 10,000) | Rs. 213 | R.9,787 |
| 3rd EMI (Rs. 10,000) | Rs. 107 | Rs.9,893 |
| Total (Rs. 30,000) | Rs. 638 | Rs. 29,362 |
| Note: The e-commerce websites these days discount the product to the exact amount of interest, which brings the amount payable to the actual price of the product. And since no extra charge is levied over and above product price, it’s called No Cost EMI. |
Know the Pros & Cons of No Cost EMI on Credit Cards
No Cost EMIs seems to be a good option, however, you should always weigh all the pros and cons before opting for it. Pros and cons are as follows:
| Pros | Cons |
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How is No Cost EMI Different from Regular EMI?
At No Cost EMI you need not pay any interest rate whereas in the case of an ordinary EMI you need to pay an amount extra as interest and that varies depending on certain conditions like how long you are going to take to pay back and how much you are actually paying.
Things to Keep in Mind
- Seek for complete transparency in the conversion of credit card transactions to EMIs by clearly indicating the principal, interest and upfront discount provided by the merchant/card-issuer (to make it no cost), prior to the conversion
- Make sure you read the instructions on loans and advances issued by RBI to avoid discrepancies
- EMI conversion with an interest component shall not be camouflaged as zero-interest/no-cost EMI
Should You Opt for No Cost EMI?
As per my understanding, No Cost EMI on a credit card is a viable option and you should only buy if:
- You are getting an amazing deal by getting an additional discount
- You are short of cash to make the upfront payment
- You want to buy a high-value product
- You want to build your credit history by availing short term loans
Some of the major banks offering No Cost EMI on credit cards are- HDFC Bank, Axis Bank, ICICI Bank, etc.
