Festive sales are coming. Three things to check before you take a no-cost EMI
No-cost EMI is not free. The interest is usually moved into the price or charged upfront as a discount you forfeit, and GST applies to it either way.
Krish Dalal
What this means for you
Before you accept a no-cost EMI this festive season, compare the EMI total against the cash price, not against the monthly amount. Add any processing fee. And remember the full purchase value is blocked against your credit limit for the whole tenure, so a ₹80,000 phone on a ₹1.5 lakh limit puts your utilisation above 50 percent and can cost you CIBIL points until it is repaid.
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Festive season brings the largest concentration of no-cost EMI offers in the Indian retail calendar. The arrangement is legitimate and often genuinely worth taking. It is simply not what the name says.
In most no-cost EMI structures the lender still charges interest. It is absorbed by the merchant as an upfront discount that you forgo by choosing EMI, or it is built into a higher listed price. Either way GST at 18 percent applies to the interest component, which is why a truly zero-cost transaction is rare and why your card statement often shows a figure slightly above the sticker price.
Three checks take a minute each. First, compare the full-payment price against the EMI total, not against the monthly figure, because the monthly figure is designed to feel small. Second, ask whether a processing fee applies, since ₹199 to ₹499 is common and is charged on top. Third, check whether the EMI blocks your credit limit for the whole tenure, which most issuers do, because that can quietly push your utilisation ratio up and your credit score down for months.
None of this makes no-cost EMI a bad deal. Spreading a genuine purchase over three months at close to zero real cost is often sensible. The trap is the second purchase, the one you would not have made at the full price.
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