No Cost EMI on Credit Cards: How It Works and the Hidden Costs

Last reviewed: October 2026

You're about to buy a new phone and the checkout says "No cost EMI available". Six easy payments and no interest. It sounds like a free loan. But no cost EMI on a credit card usually isn't completely free. Here's how it works, where the extra costs hide and when it makes sense.

What is no cost EMI?

No cost EMI lets you split a purchase into equal monthly instalments (EMIs) on your credit card, where the total of the EMIs is meant to equal the product's price. You don't see an interest charge added to the price.

It's offered by brands and online stores, together with banks, mostly on phones, laptops, TVs, appliances and furniture.

How does no cost EMI work if banks still charge interest?

Your bank does charge interest on the EMI. The seller or brand covers it, usually in one of two ways:

1. Upfront discount: the seller gives you a discount equal to the interest, so the interest and discount cancel out.
2. Built into the price: the interest cost is already included in the price, or you lose a discount you'd get if you paid in full.

The RBI has said in the past that "zero percent interest" is a misleading idea, because the interest is often just hidden somewhere else.

A simple example

• Phone price: ₹30,000
• 6-month EMI interest charged by the bank: about ₹1,500
• Seller's no cost EMI discount: ₹1,500
• Your 6 EMIs: ₹5,000 each = ₹30,000

So far it looks free. But the bank still charges GST (and often a processing fee), which you pay.

The hidden costs of no cost EMI

• GST: charged at 18% on the bank's interest and/or fees, depending on how your bank applies it. On the example above, that could be a few hundred rupees.
• Processing fee: many banks charge a one-time fee to convert a purchase into EMI, plus GST.
• Lost cash discount: some stores give a bigger discount if you pay in full. Choosing no cost EMI may mean you miss it.
• Blocked credit limit: the full purchase amount is blocked on your card and is released only as you pay each EMI.
• Foreclosure charges: closing the EMI early can attract a fee.
• Fewer rewards: many cards give no reward points on EMI transactions.

When is no cost EMI worth it?

It's worth it if:

• The extra cost (GST plus fee) is small compared with the help of spreading the payment.
• You'd buy the product anyway, at the same price.
• The EMI fits comfortably in your monthly budget.

Skip it if paying in full gets you a bigger discount, or if you're stretching to afford the item.

Before you choose no cost EMI, check

1. The final amount you'll pay, including GST and any processing fee.
2. Whether the price is the same as for a full payment.
3. The tenure: no cost EMI is often only on 3, 6 or 9 months. Longer tenures may carry interest.
4. The foreclosure terms, in case you want to close it early.
5. Your bank's EMI terms in the app or on its website, and your card's Most Important Terms and Conditions (MITC), which issuers must give you under the RBI's credit card rules.

How it affects your credit score

No cost EMI is still credit. Each EMI is part of your card bill, so pay your full bill on time every month. A missed EMI is a missed card payment and can hurt your credit score. The blocked limit also raises your credit utilisation while the EMI runs.

The bottom line

No cost EMI is a handy way to spread a planned purchase, as long as you know the real price. Add up GST and fees, compare it with the full-payment price, and pay every EMI on time.

Want a card with good EMI and shopping benefits? Compare credit cards on PaisaSimple →

Related: How credit card companies make money · Credit card interest rates explained

Sources

• RBI Master Direction – Credit & Debit Cards (2022, amended)

Disclaimer: This article is for general information only and is not financial advice. EMI interest, fees and GST treatment are set by each bank and can change. Check your bank's terms before converting a purchase to EMI.