No-cost EMI on Credit Cards: Meaning, benefits, cons and more

  • Published on: 9 Nov 2023
No-cost EMI on Credit Cards: Meaning, benefits, cons and more

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.

What is the no-cost EMI facility?

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. 

How does no-cost EMI on Credit Cards work?

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

RBI’s guidelines on no-cost EMI

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. 

Benefits and drawbacks of no-cost EMI on Credit Cards   

Like any other financial product, no-cost EMI on credit cards has certain pros and cons. The benefits include the following:

  • It is an easy and quick way to finance a big-ticket purchase 
  • This facility also allows you to comfortably pay the purchase amount without bearing any additional costs 
  • You can choose a flexible tenure depending on your finances
  • You can boost your lifestyle without worrying about high upfront costs

Here are some of the disadvantages you may face with no-cost EMIs:

  • Some credit card issuers may charge you a fixed processing fee for the facility
  • You will have to bear the GST on interest payable, which may be built into your no-cost EMIs
  • If you return the product and opt for a refund, you will lose the interest component included in the no-cost EMIs
  • If you fail to make timely repayments or pay the instalments, it will negatively impact your credit score 

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. 

FAQs on No Cost EMI on Credit Cards

Is no-cost EMI good for credit score?

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.

Is no-cost EMI really interest-free?

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.   

Can I pay the full amount on no-cost EMI?

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.

Can I buy a bike on a no-cost EMI?

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.

Can I pay credit card EMI in advance?

Yes, you can pay your credit card EMI in advance to avoid any penalty charges or negative impact on your credit score.


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