Is no-cost EMI always free? The catch buyers should know before opting for it while shopping online

No-cost EMI offers can hide extra expenses, despite being advertised as interest-free. Here's what customers should know before they opt for this route.

Online shopping deals and instant discounts have made it easier than ever to buy gadgets and appliances throughout the year. No-cost EMI offers add to the appeal by allowing buyers to spread payments over several months, with credit companies advertising the option as “no interest cost” involved.

However, zero-cost EMI does not always mean a purchase comes without extra costs. This is particularly relevant now because festive deals on all major e-commerce platforms such as Myntra, Amazon and Flipkart are live.

Many shoppers wait for these sales to buy appliances and other high-value items at steep discounts. However, an immediate cash outgo is not always preferred, making the “no-interest” tag on EMIs seem attractive.

How does a no-cost EMI scheme work?

One common option is to forego the discount and instead pay this amount to the bank or financial institution to cover the interest cost, according to a blog post by credit bureau CRIF High Mark.

In the second, the interest cost is added to the product’s price, meaning the buyer may end up paying more than they otherwise would have, the blog added.

— When discounts equal interest:

Retailers often offer ‘no-cost EMI’ by offering discounts equivalent to the total amount of interest to be paid.

For example, if you want to purchase a smartphone that costs ₹30,000 but is available for ₹25,500 with an upfront payment, the ₹4,500 discount may be unavailable to buyers who are opting for the no-cost EMI option.