No-cost EMI is not free. The interest is recovered either by withholding the cash discount you would otherwise have received, or by inflating the sticker price — and on top of that, GST is charged on the notional interest component. Ask one question at the counter: what is the price if I pay outright, today? If the answer is that you cannot pay outright, a cashback credit card paid in full on the statement date is usually cheaper than the scheme.
| What “no-cost EMI” actually costs | The forgone discount + 18% GST |
|---|---|
| What it means | On the notional interest, plus any processing fee. |
as of 2026-08-17 · Credsir analysis of standard no-cost EMI structures · reported
What to know
A worked case makes it concrete. A ₹60,000 phone offered at ₹57,000 for an upfront payment, or ₹60,000 across six no-cost EMIs, means the credit costs ₹3,000 for six months on ₹60,000 — an effective annualised rate in the high teens, before any processing fee. The scheme is not a scam, but it is a loan, and it should be compared as one — against personal loan interest rates and against the cost of simply paying with a card. The EMI calculator will convert the offer into an annual rate you can hold next to those.
The GST point is the one almost nobody knows. Where the bank charges interest and the merchant reimburses it as a discount, GST can still apply to the interest component and appear on your card statement. It is small in rupees and it is the clearest evidence that “no cost” is a description of the marketing rather than of the transaction.
Frequently asked questions
Is no-cost EMI really free?
No. The interest is recovered through a forgone discount or a higher price, and GST is typically charged on the notional interest. Ask what the price would be for an immediate outright payment — the difference is what the credit costs you.
Does no-cost EMI affect my credit card limit?
Yes. The full purchase amount is usually blocked against your available limit for the tenure, not just the monthly instalment. That can matter if you are close to your limit, because it raises your utilisation ratio — one of the larger factors affecting your credit score.
Can I foreclose a no-cost EMI?
Usually, with a foreclosure charge, and you generally do not recover the discount that was forgone at purchase. Check the terms before converting a purchase to EMI.
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