During the festive season, you’ll find a flood of offers, discounts, and deals. One popular option many customers are drawn to is the No-Cost EMI. It sounds great — the promise of purchasing high-ticket items without paying the full price upfront and in easy installments. It’s an offer that e-commerce sites and retailers push aggressively, but is it as good as it sounds? Let’s take a deeper look at what no-cost EMI really offers and the hidden costs you might not be aware of.
The Illusion of “No Cost” EMI
At first glance, the concept of no-cost EMI seems like a win-win situation. You buy your product today and pay for it in small, easy installments, with the retailer or the platform claiming to charge zero interest. Many customers assume they’re only paying for the actual price of the product and that there are no extra charges. But the reality is that no-cost EMI isn’t completely free, and there are hidden costs that make it more expensive than it appears.
Hidden Costs in No-Cost EMI
When opting for a no-cost EMI, it’s essential to know that the “interest-free” tagline doesn’t mean you’re getting the product without any extra charges. Let’s break down some of the hidden costs that come with no-cost EMI:
- No Discounts Offered: In many cases, products that come with no-cost EMI don’t have any discounts applied to them. In contrast, the same item may be available at a lower price if you choose to pay in full. So while the EMI option claims to save you money, you may be missing out on a discount that could reduce the overall cost of the product.
- Higher Prices for EMI Products: Retailers or online platforms often increase the price of the product when you choose no-cost EMI. For example, a product priced at ₹30,000 might go up to ₹32,000 or more in the EMI option. You may not feel this impact directly, but you are paying more than what the product might cost upfront.
- Processing Fees: Most banks or financing companies charge a processing fee when offering no-cost EMI. This fee can vary from ₹99 to ₹300, depending on the institution and the product. Though the interest is shown as zero, this processing fee is an indirect charge that adds to your total cost.
- GST on Interest: Even though the interest is shown as a discount in no-cost EMI, 18% GST is applicable on the interest amount. This tax gets passed on to you, making the product more expensive. So while you think you’re paying no interest, the GST on that interest is an additional cost you’ll bear.
- Pre-Closure Charges: If you decide to pay off your EMI early, banks or financial institutions might charge a pre-closure fee. This penalty for paying off the entire amount in advance can further increase the cost of your purchase.
- Late Payment Charges: One of the significant risks with EMI payments is missing your payment deadline. If you fail to pay on time, banks can charge hefty late payment fees, making the purchase far more expensive than anticipated.
Why Cash is Still King
Financial experts like Balwant Jain emphasize that paying in cash is the best way to avoid debt and extra charges. He says, “Cash is king.” No-cost EMI requires the use of a credit card, and credit cards come with their fees and charges. Moreover, if you’re not careful with your repayments, you can easily end up in debt.
Final Thought: Be Cautious
While no-cost EMI may seem attractive, it’s essential to be aware of the hidden charges. The processing fees, GST, increased product prices, and possible pre-closure or late fees can turn what appears to be a “free” deal into a costly one. Always read the terms carefully, and if possible, opt for cash payments to avoid unnecessary costs.
