Discover what is no cost EMI? It’s meaning, how it works. How no-cost EMI different from regular EMI. How it works on Amazon, Flipkart or Credit Card.
In recent years, the concept of “No Cost EMI” has become increasingly popular when purchasing big-ticket items like smartphones, laptops, and home appliances. But what is No Cost EMI exactly, and does it live up to its promise of being entirely free of hidden charges? In this article, we’ll delve into the world of No Cost EMI and explore its good and bad aspects.
No Cost EMI Meaning
No Cost EMI, short for “No Cost Equated Monthly Installment,” is a financing option offered by many retailers and online stores. It allows customers to buy products and pay for them in monthly installments without any interest or additional charges. The idea is to make expensive purchases more affordable and accessible, especially for those who may not have the means to pay upfront.
How Does No Cost EMI work
- No Extra Interest: With No Cost EMI, you won’t pay any extra interest on your purchase. This is a big advantage because when you use a credit card or take a loan, you often have to pay extra money as interest over time. But with No Cost EMI, you pay only the exact price of the item in smaller chunks.
- Fixed Monthly Payments: When you choose No Cost EMI, you agree to pay a fixed amount of money every month for a specific number of months. These payments remain the same throughout the payment period, making it easier to budget and plan your expenses.
- Easy Accessibility: No Cost EMI makes it easier for people to buy expensive things, even if they don’t have all the money at once. It’s like breaking down the cost into smaller, more manageable pieces.
- Transparent Pricing: With No Cost EMI, you know exactly how much you’ll pay in total from the beginning. There are no hidden charges or surprises, so you can make informed decisions about your purchase.
- No Credit Card Required: You don’t always need a credit card to use No Cost EMI. Many online and offline stores offer this option, and you can often use your debit card or choose from other payment methods.
How is No Cost EMI Different from Regular EMI?
No Cost EMI and Regular EMI might sound similar because they both involve paying for things in installments, but they have some important differences. Let’s break down how they’re different in simple terms.
| No Cost EMI | Regular EMI | |
| Interest Charges: | As the name suggests, No Cost EMI doesn’t have any extra interest charges. When you buy something using No Cost EMI, you pay only the original price of the item in equal monthly installments. So, if your item costs $600, you’ll pay $100 a month for six months, and the total you pay is still $600. | In a regular EMI, like when you take a loan or use your credit card to buy something, you often have to pay extra money as interest on top of the original price. This makes regular EMI more expensive in the long run. |
| Total Cost: | The total cost of the item remains the same as the original price. There are no surprises, and you know exactly how much you’ll pay from the beginning. | With regular EMI, you end up paying more than the original price due to interest charges. So, the total cost is higher than what you see on the price tag. |
| Fixed vs. Variable Payments: | Your monthly payments remain fixed throughout the entire tenure. This makes it easier to budget because you know exactly how much you’ll pay each month. | In regular EMI, your monthly payments may vary depending on the interest rate and the outstanding balance. This can make it harder to plan your expenses. |
| Accessibility: | It’s designed to make big purchases more accessible to people who might not have all the money upfront. It’s like breaking down the cost into smaller, more manageable pieces. | While regular EMI can also help you buy things in installments, the interest charges can make it less accessible for some, especially if the interest rates are high. |
| Transparent Pricing: | No Cost EMI schemes usually have transparent pricing. You know exactly what you’ll pay each month, and there are no hidden charges. | Regular EMI might have hidden fees or fluctuating interest rates that can make it harder to understand how much you’ll end up paying. |
No Cost EMI: Good or Bad?
No Cost EMI is neither inherently good nor bad. It can be a helpful financial tool when used wisely to make essential purchases without incurring interest charges.
The Good Aspects of No Cost EMI:
Accessibility: No Cost EMI makes expensive purchases accessible to more people, allowing those without the full upfront amount to buy needed items without straining their budgets.
Financial Planning: EMI plans aid in better financial planning. Fixed monthly payments facilitate budgeting as the installment amount remains consistent over the repayment period.
No Interest: No Cost EMI lives up to its name by not charging any interest. This can result in significant savings compared to traditional loans or credit card payments that often come with high-interest rates.
Transparent Pricing: No Cost EMI schemes typically offer transparent pricing, evenly spreading the total cost over the installment period. This transparency helps customers make informed purchase decisions.
See Also: Is Flipkart Good for Buying Mobile? Online Buying Guide [2023]
The Bad Aspects of No Cost EMI:
Limited Product Selection: No Cost EMI options may not be available for all products, and choices could be limited to specific brands or models. This limitation can force customers to settle for alternatives that may not align with their preferences.
Credit Checks: Some retailers may conduct credit checks before approving No Cost EMI applications. If a customer’s credit score is low, they may not qualify for this financing option, reducing its accessibility.
Hidden Charges: Despite being labeled “no-cost,” some retailers may impose processing fees or require down payments for No Cost EMI. These hidden charges can accumulate and contradict the claim of being entirely free of extra costs.
Purchase Impulsivity: The availability of No Cost EMI can tempt consumers into impulsive buying decisions. Accumulating multiple EMI commitments can lead to financial strain if not managed carefully.
How Does No Cost EMI Work on Credit Card
No Cost EMI does not come with an interest factor, unlike the regular EMI option. Let us understand the concept of no-cost EMI through an example.
No Cost EMI Plan
| EMI Plan | Rs. 10,000x 3m |
| Interest(p.a.) | Rs.638 (13%) |
| Discount | Rs. 638 |
| Total Cost | Rs. 30,000 |
- Once the order is placed, the discounted amount will be paid to the bank-Rs. 29,362 (Rs. 30,000-Rs. Rs. 638)
- The amount will be reversed by the bank within 4-7 working days and converted into EMI plan
- You will have to pay Rs. 10,000 every month for a period of 3 months
Source: https://www.paisabazaar.com/credit-card/need-know-no-cost-emi-credit-cards/
How does Flipkart or Amazon give a no cost EMI option? Do banks bear the charges?
When you buy something using a “no-cost EMI” option, it might sound like there’s no interest involved. But here’s the cool part: when you go for a “no-cost EMI” offer, the interest you’d usually pay is already included in the item’s price. This means that the total amount you need to pay, including any interest charges, is the same as the product’s original price. So, with a no-cost EMI offer, you won’t be surprised by extra interest charges, making it a smart way to buy things in smaller installments.
Here’s how it works: After you buy something on EMI, take a look at your bank statements. You’ll notice that the total amount you paid includes not just the item’s price but also some interest charges. This interest is what the bank adds to your purchase.
Now, when you shop on platforms like Flipkart or Amazon, they might not charge you extra interest, but your bank might. So, banks do not bear the charges. It’s a good idea to keep an eye on your bank statements to see how much interest you’re paying.
So, summing up…
No Cost EMI can be a useful financing option for those looking to make significant purchases without incurring hefty interest charges. It offers accessibility, financial planning benefits, and transparency in pricing. However, it’s essential to be aware of potential downsides, such as limited product selection, credit checks, hidden charges, and the risk of impulsive buying. Before opting for a No Cost EMI scheme, consumers should carefully read the terms and conditions, compare options, and ensure that it aligns with their financial goals and capabilities. When used wisely, No Cost EMI can be a valuable tool for managing your finances while making essential purchases.
Hi I am Harish. I am a blogger, writer. I am also a photographer. I love to share my thoughts and experiences through the words in my blog. Thank you.
