Hey, check it out! Flipkart’s Big Billion Day Sale is here! It has so many offers on electronics. Plus, your favourite phone you’ve always wanted to buy for a long time.
You decided to purchase it this time and grabbed your credit card which offers the best reward points, and it says No Cost EMI. Isn’t it perfect for you?
You begin with the payment process. But wait - have you ever asked yourself why would the retailers provide you with a Zero Cost EMI option? Do you think gaining reward points on credit cards is profitable? What if there’s a hidden truth behind your credit card reward points and No Cost EMI that nobody tells you? This blog has answers to all your questions.
But What Is No Cost EMI?
No Cost EMI is basically a loan that allows you to pay for a purchase without paying interest over and above the price. Well not really! You do have to pay some cost though.
Since RBI doesn’t allow interest free loans in India, the interest that should be charged to you in bundled in the product price itself. What could have been a gain for you as a discount, is made to be paid as hidden interest.
So, Zero Cost EMI is a marketing stunt made especially for you so that you buy more.
Save yourself by knowing how it works.
The Hidden Truth of the Trio - No Cost EMI, Credit Cards & Banks🤥
To start it off with the most important point is the role played by banks. The MRP of the product is set in such a way that it will profit both, the bank and the manufacturer.
Suppose your phone that you are about to buy is worth ₹100000 and under a usual 6 month EMI plan at an interest rate of 10%, your interest comes out to be ₹ 5000. But under a NO COST EMI scheme, your bank charges the interest and the merchant provides it to you as a discount at the time of the purchase, making it a NO COST EMI. And as we know, ‘there is no such thing as a free lunch’, this amount you get as a discount may then be charged from you by the bank as a processing fee.
If you pay for the phone in lumpsum, chances are you might get it at a cheaper rate. Also on top of the interest rate, you would also need to pay GST@18% on the interest to the bank.
Still wanna buy using this Scheme? The story isn’t over yet. Do you check the duration of how long this offer lasts? Are you sure you calculate all the mentioned charges? Are you aware of the hidden charges applied to your credit cards?
Don’t worry, you will know by the end of the blog! ❤️
No Cost EMI+ Credit cards - A Dangerous Duo
Now you also find an amazing pair of Airpods that may provide you extra reward points if you spend just a little more. You made the purchase to achieve the 25k reward points threshold and it made you very happy. But wait! you might wanna have a closer look at it.
Credit cards usually have yearly membership fees. Say, you spend around ₹6000/month but to achieve the required reward points, you ended up spending more than what you could afford (around ₹10,000). And the reward points that you have are not more than ₹2500. So even after considering the reward points, you still suffer a loss. Ouch!
They Win, You Lose
To put a cherry on the top, if you fail to pay your credit card balance in full, APR charges (annual percentage rate) get applied. Other extra charges include balance transfer fees, authorised user fees, annual fees, late payment fees etc. So make sure there are no hidden fees while you are making a transaction through a credit card. Also check the duration of how long the No Cost EMI offer lasts.
So What Now? Should You Even Go For No Cost EMI?
You can choose that option if you don’t have instant cash. Keep these things in mind before giving it a go:
Some Valuable Tips to Follow…
Here, at Zerobalance, we make sure all your finances remain transparent to you. It is a safe place for you to spend, control and plan your expenses. Join us in this journey to make the world of finances an easy gateway for all!