What is No Cost EMI and the Hidden Charges

What is No Cost EMI? Everywhere you go in the online platform and home appliance retail shop, the buyers are attracted by No Cost EMI. This is also called Zero cost EMI. In recent times, this has become popular with people.

Earlier in 2013, RBI popped out a circular in which it stated to close all the zero-cost EMI processes. As they charged processing fees for every transaction. This processing fee was the earnings for every lending company.

In early 2014, the EMI was offered with the help of a credit card. In which the charges were between 13-24% per annum as the interest rate. Initially, the scheme was operated for the purchase of mobiles and laptops. Then the trend applied to home appliances also.

What is No Cost EMI – How it Became a Trend?

The credit card was the only option to buy any product in the installment. They charged a high interest rate.

Then came Bajaj Finserv with a ‘No Cost EMI’ card, which has a one-time processing fee. The installation months were reserved between 3 and 6 months.

Initially, Bajaj Finserv was promoted for home appliances and mobile phones in retail stores. There was no presence in the online platform.

Currently, the No Cost EMI has started its role in e-commerce platforms.

You should understand that, in this competitive world, no one will work for free. That too spending money on your products and collecting them in installments without any installment.

Even No Cost EMI has a cost of around 13-24% interest rate which is hidden from the customer. The customers don’t find these charges and they don’t check for offers as they need the product in installment

How No Cost EMI Lenders Earns:

no cost emi - hidden charges

 The above image might have informed you more, about how the lender or Credit Card Company earns.

The service providers act as the bridge between the online/retail store and the customer. Earlier, the sales of mobile and appliances were very low compared to recent years.

This is complete because of No Cost EMI. The customer thinks they are benefiting and forgot the skill of negotiation they used to do.

The ways by which they earn are,

·       Every retail shop will have having few offers to attract customers.

·       The same amount is charged by lenders and credit card companies from the stores.

·       Since, the facility of installation made all the middle class people afford products more than their monthly salary.

·       As more footfalls into the store and purchases are made via the EMI option with no interest rate. There are high conversion chances and ultimately more purchase happens.

·       As more purchase happens, the store profit climbs higher. They eventually share the success with the lenders.

Meanwhile, just have a look at the below image, how the share of MRP (Maximum Retail Price) has to be spat among manufacturers, Promotions, and retailers.

Margin flow for appliance and electronics

Nowadays, major retail and online stores purchase bulk purchases directly from the manufacturer.

So, there is no need for stockiest and other supply chain management groups.

This is the reason, manufacturers are spending a huge volume in promotion through digital platforms and advertisements.

It holds the reason, the stores are sharing huge profits in a product and account for 30-40% maximum.

If you buy a Television for Rs. 30,000 in 6 months EMI. The offer price will be Rs.  27,000. Since you buy with the installment option, you will be buying for Rs. 30,000.

The maximum EMI tenure is 6 months. So, 3000 will be a kind of interest you pay. If you complete the EMI in 6 months, the interest rate will be 20% per annum and if completed in 3 months, the interest rate will be 40% per annum.

Which Products Have No Cost EMI Options?

The EMI option does not apply to every product in E-commerce sites and retail stores.

The main products that a retail shop has in this scheme will fall under electronics goods like laptops, mobiles, desktops, TVs, PlayStations, and home appliances.

These are the only products where you can avail of the EMI offer and it will be applicable in certain conditions.

·       The product that has newly launched has these offers at high priority in the online platform

·       The maximum EMI tenure is 6 months if it continues for more than 6 months. You have to pay an open interest of 13% per annum

·       In retail stores, these facilities apply to products that cost more than Rs. 15,000.

In simple terms, there is no benefit with No-cost EMI.

Disadvantages for Customers

There are many disadvantages for customers.

·       The main disadvantage is, that your money is earned by the lenders.

·       You can’t bargain or negotiate when you buy products in these schemes.

·       This scheme will enhance your purchase power and you tend to buy all you see in the appliance store.

·       If you buy a 32” TV by installation, you will become addicted to LED TV and you will aim at the next bigger version. The funny part here is you won’t save or set a goal and buy the higher version. Instead, you take the earlier route of the 0% EMI option.

·   This kind of scheme makes you a spendaholic and will increase more unwanted products filled in your home.

·       Once your home is filled with more products, you don’t find space to live. So, you change to a bigger home and your expenses keep on hiking up.

·       This will never make your direction towards savings. Remember, you are losing 13-24% of your earnings in this fake scheme.

Please avoid this kind of scheme. Always follow goal setting, save money towards the goal, negotiate as much as you can, and buy at a better price.


·       No Cost EMI doesn’t have benefits for customers, it benefits the lenders and retail/online stores.

·       The hidden interest rate is about 13-24% per year.

·       Lie with your mean and don’t invest in liabilities with more than you earn.

·       These schemes make you a spendaholic and will never keep you a delayed gratifier.

·       In simple terms, we strongly recommend you all strictly avoid these fake and money-drinking schemes.