No-Cost EMI Isn't Always Free: What Card Shoppers Should Check This Festive Season

Festive sales are in full swing, and card offers are everywhere. According to CNBC TV18, shoppers should check a few things first. This applies to reward points and no-cost EMI.

The short version: a card deal is only good if you pay on time. You also need to know every fee. Compare the total you'll pay with the plain cash price before you tap pay.

Key takeaways

• No-cost EMI is rarely free. The cost often hides in a lost discount or in fees.
• Rewards only help if you clear the full bill every month.
• Interest on unpaid card dues is far higher than on most loans.
• Always compare the EMI price with the cash price.
• Spend only what your monthly budget can repay.

How rewards and no-cost EMI work

A reward card gives you points or cashback on each purchase. The rate is usually a small share of what you spend. Festive offers may raise it for a few days, often with a cap.

EMI means equated monthly instalment. It splits a big purchase into equal monthly payments. On a card, the bank charges interest for this, just like any loan.

With no-cost EMI, you don't see that interest on your bill. The seller or brand often covers it by cutting the discount you'd get for paying in full. So the cost moves, but it doesn't vanish.

Banks may also add a processing fee on the EMI. Taxes apply on these charges too. GST is charged at 18% on interest and fees, so check the final statement.

What it costs you: a worked example

Say you buy a phone for ₹60,000 and split it over six months. Suppose the card charges 15% a year. That's about 1.25% a month.

Your EMI would be near ₹10,440. Over six months you'd pay about ₹62,650. That's roughly ₹2,650 in interest, plus 18% GST on it, which is about ₹480.

Now take a no-cost offer on the same phone. The interest may be zero on paper. But if the seller would give ₹2,500 off for full payment, you lose that discount.

Option	What you pay	What to watch
Pay in full, clear the bill	₹60,000	Earn rewards, no interest
Regular 6-month EMI at 15%	About ₹62,650	Interest, GST, processing fee
No-cost EMI, discount lost	₹60,000	Cash buyers may pay ₹57,500
Bill left unpaid for one month at 3.5%	About ₹2,100 extra	Rewards are wiped out

These figures are examples, not offers from any bank. Your card's rate and fees will differ. Check them in your card terms.

Here's why rewards can mislead. A 2% reward on ₹60,000 is ₹1,200. One month of interest on an unpaid bill can be ₹2,100. A single missed payment can erase the whole reward.

Who is affected

Anyone shopping this festive season with a credit card is affected. Salaried people who clear their bills in full gain the most from rewards. People who carry a balance gain the least.

First-time card users need extra care. A card EMI uses up part of your credit limit. A large EMI can leave less room for other spending. It can also hurt your credit score if payments slip.

RBI directions on credit cards expect issuers to state fees and interest clearly. So ask your bank for the exact charges in writing.

What to do before you swipe

1. Ask for the cash price and the EMI price. Compare the two.
2. Read the interest rate, processing fee and prepayment charges.
3. Check reward caps and expiry dates on points.
4. Make sure the EMI fits your monthly budget. Try the EMI calculator first.
5. Set auto-pay for at least the minimum due, and aim to pay the full amount.

If you need a larger sum, compare other options. A personal loan may cost less than a card EMI. Check current interest rates before you decide. More stories are on our news hub.

Frequently asked questions

Is no-cost EMI really free?

Not always. The interest is often covered by a lost discount, and fees and GST may still apply. Check the final bill.

Are reward points worth more than EMI interest?

Usually not. Rewards are a small share of what you spend. Card interest runs much higher.

Can I cancel an EMI early?

Many banks allow it, often with a foreclosure fee. Ask your bank before you agree.