Everything You Need to Know About No-Cost EMI on Credit Cards

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No-cost EMIs is beneficial to clients, but not everyone is aware of this since they let you make large purchases and pay you back in flexible installments without paying any interest. In this article, we will discuss what free EMI offers on credit cards, how they help consumers, how you may gain benefits from them, and whether you should choose them or not. 

How Does No Cost EMI Works?

Let’s imagine a buyer wants to buy a smartphone for Rs. 30,000. The annual interest rate is 13%, and you are selecting a 3-month EMI plan. Therefore, over the three-month term, the total interest on this loan would be Rs. 638.

No Cost EMI Plan

EMI Plan

Rs. 10,000× 3 months

Interest (p.a)

Rs. 638 (13%)

Discount

Rs. 638

Total Cost

Rs. 30,000

  1. After the order is placed, the discounted value of Rs. 29,362 will be paid to the bank which is Rs. 29,362 (Rs. 30,000 - Rs. 638).
  2. Within 4 to 7 working days, the bank will reverse the payment and convert it to an EMI Plan.
  3. Then you will have to pay Rs. 10,000 per month for a three-month term.

That’s how your monthly statement will appear:

Monthly Installment

Interest

Amount to be paid

1st EMI (Rs. 10,000)

Rs. 318

Rs. 9,682

2nd EMI (Rs. 10,000)

Rs. 213

Rs. 9,787

3rd EMI (Rs. 10,000)

Rs. 107

Rs. 9,893

Total - Rs. 30,000

Rs. 638

Rs. 29,362

No-cost EMI: Credit cards

Nowadays, businesses provide no cost EMI to consumers with both debit and credit cards. In the event of no-cost EMI on a credit card, the amount due is subtracted from the credit limit on your card. And with each EMI that you pay, the credit limit is recovered gradually.

Suppose you paid Rs. 30,000 for a smartphone using a credit card with Rs.1 lakh limit and a 3-month interest-free EMI. The credit limit will drop to Rs. 70,000 and then increase to Rs 1 lakh for three months as long as you continue making EMI Payments.

Benefits of no-cost EMI

There is a reason why online retailers provide free EMI in agreements with the nation’s top banks. The following benefits of no-cost EMI are:

  1. The ability to purchase expensive utilities without making a payment in advance.
  2. Pay flexibly across several months.
  3. Flexibility to select the term based on your monthly budget.
  4. Better budgeting is made possible by providing the ability to pay the same money in installments.

Drawbacks of no-cost EMI

While the no-cost EMI is indeed convenient and enables you to buy things you need but haven’t been able to because of financial limitations, it does have several disadvantages. Let's look at it.

  1. EMI payments are more expensive than upfront payments.
  2. For the EMI, you need to pay a fixed, non-refundable processing charge.
  3. GST on the interest that is due must be paid.
  4. You will still lose money on interest even if you return the item and obtain a refund.
  5. You may end up purchasing pricey utilities that you don’t need.

Conclusion

No-cost EMI could be a useful financial instrument, but it must be used intelligently. It is a gift with the potential to change lives as well as your financial condition. Even though No Cost EMI deals are a fantastic method to reduce your credit card cost, it’s important to remember that it has a higher interest rate than a standard credit card. To avoid falling into a debt trap, be cautious and keep a close eye on your spending.

Read More: Drawbacks of Delayed Credit Card Payment

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