Opting for no-cost EMI on credit cards is a great way to finance big-ticket purchases without making a dent in your savings. Many credit card issuers offer this facility on select products, brands and more. Additionally, you can opt for this payment option on online and offline platforms.
To know the no-cost EMI meaning, how the facility works and its benefits, read on.
The facility of no-cost EMI, meaning the option where you can pay for your purchase in instalments without any interest, is quite attractive. When it comes to credit cards, the EMI conversion facility allows you to pay a specific bill in instalments.
However, an interest charge is usually levied across the tenure and added to the instalments you pay. This interest results in additional costs, over and above the bill value. This is why no-cost EMI is also often referred to as zero-cost EMI or interest-free EMI.
Now that you know what is no-cost EMI, you must know how this facility works. Knowing this is important because the facility is not interest-free in its truest sense, as the monthly instalments already include interest charges under this facility.
One approach that the seller or service provider may use is excluding any discounts on the product or service. The discount is then equated to the applicable interest. For instance, you will get the product at the regular price when you opt for the facility while other customers may get it at a discounted price.
Another approach is that the merchant may offer an upfront discount to the credit card provider for the interest. So, the credit card provider will charge interest, but you as the customer can access the no-cost EMI facility.
Also Read: Benefits of Using Credit Cards
In September 2013, the Reserve Bank of India (RBI) issued a circular that said that the No Cost EMI practice “is non-existent.” This is because the interest is bundled in the product’s price itself.
In addition, to protect customers from unfair lending practices and maintain transparency, it banned the banks from offering 0% interest schemes on retail products for a period of 10 years.
Like any other financial product, no-cost EMI on credit cards has certain pros and cons. The benefits include the following:
Here are some of the disadvantages you may face with no-cost EMIs:
As you can see, you can use a no-cost EMI card to cover your purchases and ease financial strain. One of the rewarding credit cards that you can choose to access this facility is the Fibe Axis Bank Credit Card. With this card, you can also enjoy exclusive discounts and cashback to make the most of your finances. Download the Fibe App here or log in to our website to apply for it now.
Yes, opting for no-cost EMI on credit cards can be good for your credit score if you pay the instalments on time. Doing so helps build your repayment track record and your creditworthiness. However, remember that paying on time is crucial.
Many brands and credit card issuers promote a no-cost EMI Card as a financial product that allows you to purchase a product in instalments without interest charges. However, this is a misnomer because either the EMIs or the cost of the product already include the interest charges, the breakup of which may not be clearly visible to you.
Yes, depending on the issuer, you may be able to pay the entire amount in no-cost EMI on credit cards. Once your EMI plan begins, you may also be able to pay the entire loan amount before the EMI tenure ends. However, note that some issuers may levy a prepayment charge.
Yes, if the company offers this particular facility on your credit card and the bike’s cost is within the credit limit, you can buy it on no-cost EMI.
Yes, you can pay your credit card EMI in advance to avoid any penalty charges or negative impact on your credit score.