No Cost EMI on Credit Cards: How It Works, Advantages and Disadvantages

Browsing through your favourite electronics, gadgets or appliances but worried about your budget? Let not your budget hold back your shopping desire, as no cost EMI on credit card might be your solution. 

Convert your shopping amount on your credit card into no cost EMI periods of 3 to 12 months, depending on your card issuer, for purchase amounts above a set threshold.

Read this blog to learn how it shapes your shopping experience.

Quick Summary

• It allows you to shop using your credit card and convert it into easy EMIs.
• You do not have to pay additional interest, but only the product price.
• However, processing fees and GST are applicable in this plan.

No-cost EMI on Credit Card Working Process 

As the name implies, the no cost EMI on credit cards allows you to divide the entire cost of a product into affordable monthly installments without interest. 

Effective for purchasing items with a higher price tag, this offer allows you to select your preferred items without paying a lump sum for each product. 

A Real-Life Example of No-Cost EMI on Credit Card Working Process

Suppose you are buying a phone with a price tag of ₹50,000. Now at 15% interest per annum, this costs ₹54,155 for 12 months. Here is how a no cost EMI reduces the additional interest payment if you go for it:

• The offer waives off the interest of ₹4,155 upfront.
• Your monthly EMI is only for the actual price of the phone, which is ₹4166.67.
• You pay 12 EMIs of the above amount, paying no additional charges for the phone.

Advantages of No-Cost EMI on Credit Card

• Reduced Financial Strain: Credit card EMIs with interest can result in payment of an additional 36%-48% on the loan amount, which is an add-on spending. With no cost EMI, you can significantly reduce this additional cost.
• Better Budget Planning and Spends: This feature allows you to split your purchase amount into affordable EMIs, which helps to maintain your monthly budget. You can also use your remaining credit limit for further purchases as you have not paid in a lump sum, ensuring better savings.
• Credit Score Improvement: As you continue paying EMIs regularly, it leaves a good impression on your credit score. It also makes you eligible to increase your credit limit or request additional loans.

Disadvantages of No-Cost EMI on Credit Card

• Processing Fee: Suppose you buy an item worth ₹50,000 at no cost EMI, but your credit card issuer will charge a processing fee of up to ₹500. This amount also gets adjusted with your EMI amount. 
• Blocked Credit Limit: When you convert a lump sum purchase on your credit card to no cost EMI, you cannot use that limit fully until the EMI tenure is completed. Suppose your credit limit is ₹1 lakh and your purchase for ₹50,000 will be gradually released as you keep paying the EMIs. 
• Foreclosure Charges: Most credit card issuing institutions impose a foreclosure charge of 2% to 4% on the entire amount. 

The Verdict: Is the No-Cost EMI Option Worth it? 

When considering significant purchases like a laptop, air conditioners, etc., the cost can often feel overwhelming, especially when the upfront price is high. In such cases, exploring options like a no cost EMI plan can make a huge difference. 

Instead of paying the entire amount upfront, which may strain your budget, you can split the cost over several months without incurring any additional charges.

If you are confident about the monthly repayments and even if there are no special discounts or cashback offers available, you can go for it for more savings. 

How to Select the Best No-Cost EMI Plan? 

Your income, offers, additional charges and eligible shopping criteria are some factors you should consider to get the best out of a no cost EMI plan:

• Factor Assessment and Offer Comparison: Before going straight up buying and converting credit card spends to EMIs, you must consider your monthly income or cash flow, compare offers and look for hidden charges.
• Eligible Shopping Criteria: Also, you can understand its worth by looking at the applicable shopping categories, as no cost EMIs might not be available for all types of purchases.  
• Consider the Additional Charges: Even the best no cost EMI cards include additional processing charges and GST. Consider this additional cost to determine exactly how much you are spending extra, and whether it is worth it. 

Final Word

No cost EMI on a credit card brings you the flexibility without worrying much about budget and shopping. This option lets you convert your card spends into easy EMIs, but you must pay a nominal charge and GST. 

Alternatively, you can fulfil your shopping requirements with a secured credit card from Stable Money. Download the app now to know more!