No Cost EMI Explained: Is No Cost EMI Actually Free?

[purushotham]

For this purchase

From CC Account ₹ 74000 was deducted

₹ 6000 Instant discount was given

I had choosen 6Months EMI of ₹ 12459

EMI is 12459 * 6 months = 74759

So only 759 is extra amount or any other extra amount will be there excluding 759 ?

Will this 759 include processing fees & GST
Or any extra amount will be there.

My First Time EMI purchase

 

[NShah]

For this purchase

From CC Account ₹ 74000 was deducted

₹ 6000 Instant discount was given

I had choosen 6Months EMI of ₹ 12459

EMI is 12459 * 6 months = 74759

So only 759 is extra amount or any other extra amount will be there excluding 759 ?

Will this 759 include processing fees & GST
Or any extra amount will be there.

My First Time EMI purchase

Interest amount and interest discount is different full interest discount not given
199+gst processing fee
Gst on monthly emi

Will this 759 include processing fees & GST
Or any extra amount will be there.

No

 

[purushotham]

Interest amount and interest discount is different full interest discount not given
199+gst processing fee
Gst on monthly emi

No

So monthly EMI will be ₹ 12459 + GST ?

 

[NShah]

So monthly EMI will be ₹ 12459 + GST ?

Gst on interest amount

 

[sushilyadav]

Sometimes the bank discount offer is applicable only on EMI transactions and not applicable over full swipe. So what’s the catch in this?

 

[RishiKiDev]

Sometimes the bank discount offer is applicable only on EMI transactions and not applicable over full swipe. So what’s the catch in this?

Catch is that banks want to earn money!
On EMI txns they charge you processing fees and interest.

 

[sushilyadav]

Catch is that banks want to earn money!
On EMI txns they charge you processing fees and interest.

But the discounts are provided by Merchant. If merchants are giving discount for No Cost EMI then they should also give discounts on full swipes. This way merchants will get more upfront amount in comparison to No Cost EMI

 

[RishiKiDev]

But the discounts are provided by Merchant. If merchants are giving discount for No Cost EMI then they should also give discounts on full swipes. This way merchants will get more upfront amount in comparison to No Cost EMI

Who said that? Its a joint effort. If merchant only provided the discount then they won't have partnered with a particular bank.
Merchant discounts are already shown in the product discount but if you are getting card discounts then it's in a partnership with a bank, the discount is sponsored by both.

 

[Shekhar malik]

@TechnoFino
Want to save foreclosure charge and processing fees as well?
You can cancel not foreclose EMI conversion and pay the full amount upfront.
Just contact the bank after 3 days of transaction and ask for cancellation. Get processing fees and GST refunded. 🔥

For Axis bank, they allow to cancel within 30 days,
4 days for HDFC.

Ref: Check screenshot attached.

Can you please explain the whole process to cancel your EMI i am brain dead confused by finding nothing useful.

 

[kvagarwal]

Can you please explain the whole process to cancel your EMI i am brain dead confused by finding nothing useful.

Simple h, call the bank within 3-4 days of txn and ask for cancellation. not foreclosure, just cancellation.

 

[ragz]

Simple h, call the bank within 3-4 days of txn and ask for cancellation. not foreclosure, just cancellation.

If it's a merchant emi (no cost emi offered by amazon, Flipkart etc) then you cannot cancel it until you return/cancel the order from merchant side. Only option in such case is to foreclose emi with couple of days of interest and emi fee +gst (mostly 200 rs +gst)

 

[SSV]

If it's a merchant emi (no cost emi offered by amazon, Flipkart etc) then you cannot cancel it until you return/cancel the order from merchant side. Only option in such case is to foreclose emi with couple of days of interest and emi fee +gst (mostly 200 rs +gst)

+ 3% fore-closure fee in some bank's cases ( example , HDFC) ...

 

[Tejo]

Can you please explain the whole process to cancel your EMI i am brain dead confused by finding nothing useful.

Order under. ... emi

After delivery of order, call card issuer bank, order them to cancel emi order.

You can also cancel emi from card issuer bank apps or negbanking.

Note: you should order before the statement generation and cancel EMI before statement generation, else you need to pay processing fee + foreclossuer charges.

 

[ragz]

+ 3% fore-closure fee in some bank's cases ( example , HDFC) ...

I cancelled within 4 days and was not charged any foreclosure charges, just emi processing charges+gst

 

[Piyush Yadav]

If you are a credit card user, there is a high probability that you have made purchases using the EMI (Equated Monthly Installment) option. There are a few ways to avail of EMI options:

[Article Link: https://www.technofino.in/no-cost-emi-explained-is-no-cost-emi-actually-free/]

1. Purchase directly from the merchant at EMI.
2. Pay the full amount initially and then convert the charge into EMI by contacting your card issuer.
3. Opt for No Cost EMI.

When we make a purchase at EMI or convert our purchases to EMI through the bank, the bank charges us interest on the principal amount. It is a short-term personal loan. However, the bank does not report these separately to the credit bureaus.
In the case of No Cost EMI, as the name suggests, it implies EMI without any interest. But is it truly interest-free? Let's explore the charges associated with No Cost EMI to find out.
So, when you decide to make a purchase using the No Cost EMI option, let's consider buying a Samsung Galaxy S23 Ultra 5G with a cost of Rs. 1,24,999 on Amazon. You can choose to use a HDFC Bank credit card for the transaction and you will be presented with various tenure options to select from.

As you go through the options, you will notice that there is a total interest amount mentioned along with an equivalent discount for each tenure.


In reality, banks do not offer interest-free EMIs. Instead, it is the merchant who provides an upfront discount equivalent to the interest amount that the bank would charge if you were to opt for the No Cost EMI. Essentially, the bank still applies their interest as per their policy, but you receive an immediate discount of the same amount from the merchant.

In this scenario, if you choose the 24-month No Cost EMI option, you will be charged a total of Rs. 1,06,372. You will receive an upfront discount of Rs. 18,627 from the merchant (Amazon in this case), which offsets the future interest charges.

Now, let's take a look at the charges associated with No Cost EMI:

1. Processing Fees: Typically, banks charge a flat processing fee if you choose the No Cost EMI option. This fee can range from Rs. 99 to Rs. 300.
2. GST on Interest: Although customers receive the interest amount as an upfront discount, banks still levy GST (Goods and Services Tax) on the interest component of the credit card EMI. Therefore, for each EMI, you will have to pay 18% GST on the interest amount.
3. Foreclosure Charges: If you decide to cancel the EMI at any time, banks usually impose foreclosure charges. These charges can range from 2% to 5% of the remaining EMI amount.

It is important to be aware of these charges before opting for the No Cost EMI option.

Many people often misunderstand the concept of "No Cost EMI" and mistakenly believe that there will be no interest charged by the bank if they choose this option. This misconception can lead to feelings of being cheated once they discover the reality behind No Cost EMI. It is essential for individuals to understand all the associated fees and how No Cost EMI works before utilizing it.

Here's a helpful tip for you: Consider selecting the maximum available tenure when opting for a No Cost EMI. By doing so, you can receive the maximum interest discount. After the EMI is posted on your credit card account, which typically takes 3 to 7 days, contact your card issuer and cancel the EMI. The bank will ask you to pay the remaining amount. Even after paying foreclosure charges, significant savings can be achieved.

Let's refer back to the example we discussed earlier with the Samsung Galaxy S23 Ultra 5G. If you choose the 24-month EMI tenure, you will receive an upfront discount of Rs. 18,627, resulting in a charge of Rs. 1,06,372. However, if you cancel your EMI a few days after the purchase, even after paying a 3% foreclosure fee (approximately Rs. 3,035, calculated as 3% of the remaining amount after deducting the upfront discount), you can save nearly Rs. 15,500 as an upfront discount.
However, it is crucial to perform your own calculations and consider the terms and conditions before employing such tactics.

I have ques 🙋?
What to prefer Minimum Tenure or Maximum tenure? 🤔... And also one thing.. does selecting maximum tenure can impact my cibil score or in selecting minimum tenure... Which one to choose....

 

[Thomas Shelby]

I have ques 🙋?
What to prefer Minimum Tenure or Maximum tenure? 🤔... And also one thing.. does selecting maximum tenure can impact my cibil score or in selecting minimum tenure... Which one to choose....

Prefer Maximum tenure to get maximum discount

 

[the_dark_knight]

This is an emi on credit card, but not a personal loan emi. Hence no separate reporting to cibil. Since the emi principal amount, interest,gst etc are billed to your credit card account only, so only payment history of your credit card gets reported to cibil

I have ques 🙋?
What to prefer Minimum Tenure or Maximum tenure? 🤔... And also one thing.. does selecting maximum tenure can impact my cibil score or in selecting minimum tenure... Which one to choose....

 

[Piyush Yadav]

This is an emi on credit card, but not a personal loan emi. Hence no separate reporting to cibil. Since the emi principal amount, interest,gst etc are billed to your credit card account only, so only payment history of your credit card gets reported to cibil

Currently i have an purchase of rs. 13500 in which i choose no cost emi from merchant... Currently only 1 emi was paid... There is also a 6 month tenure for that.... Can you guide me what to do for that...

 

[the_dark_knight]

Currently i have an purchase of rs. 13500 in which i choose no cost emi from merchant... Currently only 1 emi was paid... There is also a 6 month tenure for that.... Can you guide me what to do for that...

If you already paid one emi, then it cannot be cancelled, the only option is foreclosing the emi by paying foreclosing fee etc

 

[Piyush Yadav]

If you already paid one emi, then it cannot be cancelled, the only option is foreclosing the emi by paying foreclosing fee etc

If you already paid one emi, then it cannot be cancelled, the only option is foreclosing the emi by paying foreclosing fee etc

Soory it was by mistake...
Not even single emi was paid there was an emi of 2370rs. which due date is on 4/2/2024....only some gst fees of 300rs. something was paid..