What no-cost EMI means
No-cost EMI is a way to buy something now and pay for it in equal monthly instalments (EMIs) that add up to the price on the label. It is still a loan. The lender charges interest as usual, and the shop or brand gives you a discount of the same size, so the interest seems to vanish.
The lender is either your credit card company or an NBFC (a finance company that is not a bank) that gives loans for goods like phones, TVs and fridges. The discount that covers the interest is often called subvention.
A short example
Divya, 30, buys an ₹18,000 washing machine on her credit card: 6 EMIs of ₹3,000. The card company’s rate is 14% a year, and there is a ₹199 processing fee plus GST.
| ₹ | |
|---|---|
| Six EMIs | 18,000 |
| Interest hidden inside (covered by the discount) | 713 |
| GST on that interest (card EMIs only) | + 128 |
| Processing fee with GST | + 235 |
| What Divya pays in all | 18,363 |
So “no-cost” costs her ₹363, about 2% of the price. If the shop also offered ₹900 off for paying in full, she would have paid ₹17,100 upfront. Next to that price, the EMI route costs ₹1,263 more.
With an NBFC loan instead of a card, there is no GST on the interest, so the extra would be ₹235.
Fictional example. The rate and fee are illustrative, not an offer. Calculated by Paisavy and rounded to the nearest rupee.
Our guide No-cost EMI: is it really free? compares card EMIs and NBFC loans in more detail.
Where you see it
- On the checkout page or the shop’s price tag, as “No-cost EMI” or “0% EMI”.
- On your credit card statement, as separate lines for the principal, the interest, the discount and GST. RBI rules say a card company must show the principal, interest and discount before it converts a purchase, and on the statement.
- In the KFS (Key Facts Statement, the short loan summary) if the lender is an NBFC. Card EMIs do not get a loan KFS.
What it is not
It is not zero interest. Interest is charged and then offset. On a card, the 18% GST on that interest is still yours to pay.
It is not cheaper than paying in full when a cash discount is on offer. Compare the EMI total with the best price you could pay today, not with the label price.
It is not free if you miss a payment. A missed EMI goes on your credit report, and late fees apply. The “no-cost” terms may also stop.
What to check
- Ask for the lowest pay-now price after every discount.
- Ask for the processing fee and whether GST is extra.
- On a card, look for “GST on interest” lines on the next statements.
- Check that the EMI fits your weakest month, not your average one.
To see the real cost of an offer with your own numbers, use the No-cost EMI calculator. Nothing you type leaves your device.