Festive sales are when “no-cost EMI” shows up on every product page, and it sounds like a free loan. It isn’t free, and it isn’t always cheap either. Whether it costs you ₹700 or ₹3,700 on a ₹60,000 purchase depends on one thing most people never check: the price a cash buyer would have paid.
Behind the “0% interest” label, the bank or card issuer still lends you the money at its normal rate. The interest doesn’t disappear. It’s covered in one of two ways: the seller pays it to the bank (called interest subvention), or you give up a discount you’d otherwise get, so the cost is built into the price. Either way, someone pays it. If you’re lucky, that someone isn’t you. If you’re not, it’s you, through the price.
To make it concrete, take a ₹60,000 phone on a 6-month no-cost EMI. The numbers below are illustrative: I’ve assumed the bank’s internal rate is 15% a year and the processing fee is ₹199. Your issuer’s figures will differ.
| If the cash price is also ₹60,000 | If a cash buyer gets ₹3,000 off | |
|---|---|---|
| What the cash buyer pays | ₹60,000 | ₹57,000 |
| What you pay with no-cost EMI | ₹60,712 | ₹60,712 |
| Extra cost of EMI | ₹712 (1.2% of the price) | ₹3,712 (6.5% of the cash price) |
| Rough yearly cost of the credit | about 4% a year | about 24% a year |
The same EMI is a fairly cheap way to spread a payment in one case and costs about as much as a credit card in the other. The only difference is whether a discount was lost. That’s why comparing only the monthly instalment with the product price tells you almost nothing.
Because the whole purchase value sits on your card for the full tenure, a big EMI can push your credit utilisation up, and utilisation is one of the main factors in your score. A missed instalment is reported like any other late payment. If you’re also working on your score, see our guides on improving your CIBIL score fast and what a CIBIL score is. And if you’re shopping a big sale, our post on saving money in the Big Billion sale has more ways to avoid overpaying.
Is no-cost EMI really interest-free?
Not quite. The lender still charges interest, but a seller discount or subsidy offsets it, so you don’t see it as a separate charge. You still pay GST on that interest, and often a processing fee.
Why do I pay GST on a no-cost EMI?
Because the bank technically charges interest, and 18% GST applies to it. The discount offsets the interest, but not the GST on it.
Does no-cost EMI affect my credit score?
It can. The full purchase amount blocks your credit limit, which raises your utilisation, and a missed instalment counts as a late payment.
Can I close a no-cost EMI early?
Usually yes, but some issuers charge a foreclosure fee of around 2-5% plus GST, and early closure may cancel the discount behind the “no-cost” offer.
Is no-cost EMI better than paying in full?
Only if the EMI price matches the best cash price and the fees are small. If paying in full would have earned a discount or cashback, EMI costs more.
Sources: lender and fintech guides on no-cost EMI, checked in October 2026. Charges differ by bank, card and merchant, and the worked example uses assumed figures (a 15% internal rate, a ₹199 fee and a ₹3,000 cash discount), so treat it as an illustration. Check the offer terms at checkout before you commit. This is general information, not financial advice.
