No Cost EMI on Credit Cards

The basic concept of EMI is to allow consumers to purchase costly products through small monthly payments over a predetermined period of time. In most cases, interest on the outstanding balance must be paid. This fixed monthly payment option is ideal for any customer who wants to stick to a set spending limit. To put it simply, the only amount you pay with no-cost EMI is the product price, which will be divided equally over a predetermined period.

• In case of regular EMIs, bank charges you a processing fee and interest, both of which vary from bank to bank. Axis Bank, for example, charges interest at 18% p.a. and a processing fee of 2% of the transaction value (minimum Rs.250), plus GST, on EMI conversion. For instance, if an individual has bought a product worth Rs.12,000 and has availed a standard EMI option of 6 months, the breakup of their payment will be as follows:
  • Tenure of EMI= 6 months
  • Principal sum= Rs.12,000
  • Rate of Interest= 12% p.a.
  • Processing Fee=2%

So, each month, the buyer has to pay Rs.2,071. They will be charged an interest worth and a processing fee of Rs.240. Hence, the buyer has to pay a total amount of Rs.12,663.

In the case of no-cost EMIs, the buyer pays no net interest on the product purchased, as the interest charged by the bank is offset by an upfront discount or a cashback. The bank may still charge a processing fee and GST. For instance, if an individual has bought a product worth Rs.12,000 and has chosen an EMI tenure of 6 months, they will have to pay Rs.2,000 per month. The total net interest charged will be Rs.0. Hence, the total amount that the buyer has to pay is Rs.12,000, excluding any processing fee and GST.

Reserve Bank of India's Rule on No Cost EMI Credit Cards

In September 2013, the RBI advised banks that the concept of zero per cent interest is non-existent, as the interest is often camouflaged and passed on to the customer in the form of a processing fee. It also said that a discount offered on the price of a product should be passed on by reducing the loan amount, rather than by reducing the rate of interest. This is the reason why many major banks charge interest on a monthly basis and then refund it to customers in the form of a cashback or a one-time quick discount.

No- Cost EMI Advantages

The various benefits of No-Cost EMI are mentioned below:

• Allows an improvement in lifestyle with the ability to pay for expensive products with monthly installments.
• Zero-interest EMI, which was previously only accessible for high-ticket items like smartphones, washing machines, and laptops, is now available for other products like furniture, cosmetics, travel, etc.

No-Cost EMI Disadvantages

The various disadvantages of No-cost EMI are mentioned below:

• A Low-Cost EMI credit is similar to a No-Cost EMI credit. Customers could end up paying far more than they would have if they had paid cash.
• A no cost EMI can result in random buying spree that can be harmful for the customer.
• Failing to pay the EMI on time might result in a negative credit score.
• The upfront discount may not apply if you cancel or return the product, and the bank may charge foreclosure or cancellation fees.
• The full purchase amount is blocked on your credit limit until the EMIs are repaid. 

Process To Avail a No-Cost EMI

While shopping online, individuals can avail a no-cost EMI while buying expensive gadgets, furniture, appliances, and lifestyle accessories, among others. However, at brick-and-mortar stores, this finance scheme is applicable only to gadgets, appliances, and furniture. Listed below are the procedures that a buyer needs to follow in order to avail a no-cost EMI:

Process to Avail No-Cost EMI While Shopping Online

While shopping online for gadgets and appliances on websites like Flipkart and Amazon.in, the buyer has to follow the steps listed below:

• Select the product they want to buy.
• They will need to check if that particular product has no-cost EMI options available.
• If the product has EMI options available for its purchase, the buyer will need to go through all the instalment options available.
• They will need to select the EMI option that they think will suit their finances on the payment page.
• Next, they will need to enter their credit card details including the card number, name on the card, expiry date, and the CVV number.
• Once they proceed with the checkout, the principal amount will be blocked on their credit card.
• They will receive a complete breakdown of the payment details on their registered email id.

Process to Avail No-Cost EMI while Shopping Offline

While shopping in brick and mortar stores for expensive gadgets, furniture, and appliances, the buyer has to follow the steps listed below:

• Once they have selected the product that they want to buy, the buyer will need to select the EMI option that they want to avail. The EMI options available in stores is 3, 6, 9, and 12 months.
• Next, they will need to fill out a form with details like their name, contact number, address, the EMI option that they want to avail, and their signature.
• They will also need to submit copies of one proof of identity and proof of address along with the form.
• Once the documentation is done, they will be allowed to take the product home.

Online Stores that Offer a No-cost EMI Option

Individuals who want to make a big-ticket purchase using the no-cost EMI option online can do it by buying the gadget or appliance on Flipkart or Amazon India. These two online stores provide the no-cost EMI option for their customers so that they don't have to burn a hole in their pockets while making the purchase. Let's take a look at how Flipkart and Amazon India's no-cost EMI option functions:

No Cost EMI Online on Flipkart

The online shopping giant has tied-up with several banks, including Kotak Mahindra Bank, to offer this finance scheme to its customers. However, this option is available on a list of products only. There is no additional interest or processing fee charged on the product by Flipkart. Your card-issuing bank, however, may charge its own processing fee and GST. For instance, if an individual buys a refrigerator for Rs.18,000 and chooses to pay the money back in 9 instalments, they will need to pay Rs.2,000 for 9 months. There will be no extra interest on the transaction, as the interest is offset by an instant discount. Listed below are the steps that one needs to follow to avail the no-cost EMI option on Flipkart:

• Once they select the product, they will need to check the product page for the "No-Cost EMI" option.
• Under the "No-Cost EMI", they will get to see the plans that are available for that particular product.
• Next, from a list, they will need to select their preferred bank and the tenure of the instalment. The tenure can range from 3 to 12 months.
• Then, they will have to click on the "Continue" tab and place their order.
• In the payment mode, they will need to select "No-Cost EMI."
• Next, they will need to select their credit card and enter its details.
• They will then be able to complete the transaction.

No Cost EMI Online on Amazon India

The Indian branch of the US e-commerce website Amazon, offers a no-cost EMI option in partnership with )several banks, including Axis Bank, HDFC Bank, ICICI Bank, Kotak Mahindra Bank, SBI, RBL Bank and Federal Bank, and on the EMI card provided by Bajaj Finance, an NBFC (Non-banking Financial Company). While purchasing a product on Amazon.in that has a no-cost EMI option available, the buyer will not pay any net interest, although the bank may charge a processing fee and GST. For example, if they are buying a television for Rs.27,000 that comes with the option of no-cost EMI and they choose to make the payment in 9 instalments, they will have to pay Rs.3,000 for 9 months. Hence, they will end up paying Rs.27,000 which is the exact amount borrowed. However, the available tenure depends on the bank and the brand offer, and typically ranges from 3 to 12 months, with longer tenures on some offers. A minimum order value of Rs.3,000 applies for credit card EMI. Listed below are the steps that one needs to follow to avail the no-cost EMI option on Amazon.in:

• Buyers will need to select the product that they need to buy and check its eligibility for no-cost EMI.
• Once they check the eligibility, they will need to select the tenure of their EMI.
• After that, they will be directed to the payment page.
• On that page, they will need to type in the details of their credit card including the number of the card, name on the same, expiry date, and CVV number.
• Once they furnish the above-mentioned details, their transaction will be processed.

Offline Stores that Provide No-Cost EMI Option

Apart from online stores like Flipkart and Amazon.in, a lot of brick and mortar stores also provide a no-cost EMI option on mobiles, furniture, and appliances, amongst an array of products that the customers can choose from. However, at some of these stores, the customer would need to fill out a form and submit a couple of documents while availing this option. Once the documentation is fulfilled, customers will be able to take home the product they want. However, most of these stores have a minimum purchase amount that the customer needs to fulfil in order to avail the no-cost EMI option.

Participating Banks for No-cost EMI Scheme

There are quite a few banks in India that offer no-cost EMIs for consumers who want to buy gadgets and appliances online as well as from brick-and-mortar stores. Listed below are the names of the banks that offer this facility:

1. Axis Bank
2. HDFC Bank
3. SBI
4. IndusInd
5. Yes Bank
6. Kotak Mahindra Bank
7. RBL Bank
8. HSBC
9. Standard Chartered Bank
10. ICICI Bank 

Look for total transparency when converting credit card transactions to instalment payments by making clear the principal, interest, and any upfront discounts given by the retailer or credit card issuer before the conversion. To prevent discrepancies, ensure that you read the guidelines provided by the RBI on loans and advances. Note that an interest-containing EMI conversion cannot be passed off as a zero-interest or no-cost EMI.

Summary

No cost EMI on credit cards lets you pay for a purchase in equal monthly instalments without paying net interest, as the bank offsets the interest through a discount or cashback. The bank may still charge a processing fee and GST, and the offer is usually limited to selected products and cards. Compare the terms of each no cost EMI offer before you pay. 

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