The festive season is around the corner, and with it come the two most-awaited mega shopping events in India—Amazon’s Great Indian Festival and Flipkart’s Big Billion Days. Both sales will kick off from September 23, right after the revised GST rates are implemented. With discounts on electronics, fashion, appliances, and household items, shoppers are all set to fill their carts.
But beyond the flashy banners, countdown timers, and “deal of the day” tags, one term is being aggressively promoted: “No-Cost EMI.” It promises consumers the ability to purchase products in easy monthly installments without paying any additional interest or charges. Sounds perfect, right?
The reality, however, is not as simple as it appears. “No-Cost EMI” is often a marketing strategy that cleverly hides costs in plain sight. Let’s explore how it really works, why it may not always be in your favor, and what you should do before choosing this payment option during the festive sales.
Why “Free” Is Rarely Free
Whenever you come across a “free” deal, it’s essential to remember a basic principle: companies are never in business to lose money.
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In “Buy One Get One Free” offers, prices are inflated so that the seller still makes a profit.
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Free social media platforms generate revenue by selling user data to advertisers.
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Likewise, “No-Cost EMI” may remove visible interest charges, but the cost is simply shifted to another part of the transaction—usually in the form of higher product prices, processing fees, or the loss of upfront discounts.
How No-Cost EMI Actually Works
At its core, an EMI (Equated Monthly Installment) is a loan repayment structure. The Reserve Bank of India (RBI) does not allow loans without interest, which means a true zero-interest loan is impossible. So how do e-commerce platforms and banks call it “no-cost”?
Here’s the trick:
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The interest is not removed. Instead, it’s adjusted by the seller or manufacturer.
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Either the product price is increased to cover the cost, or the upfront discount is removed if you choose EMI.
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Banks may also charge processing fees and add GST on top of it.
In short, the “cost” still exists—you just don’t see it directly.
Hidden Costs You Should Know About
1. Loss of Discounts
If you pay upfront, you often get instant discounts or cashback offers. These are usually unavailable with EMI purchases. So, while the EMI looks attractive, you miss out on real savings.
2. Processing Fees and GST
Most no-cost EMI schemes include a processing fee of 1–3% of the product cost. Add 18% GST on that, and the expense climbs further.
3. Blocked Credit Limit
When you purchase a product on EMI using a credit card, the entire product cost is blocked against your credit limit. As you repay the installments, the available limit gradually increases. During this period, your credit utilization ratio shoots up, which may hurt your credit score.
4. Penalties for Missed Payments
If you miss even a single EMI, you could face penalty interest, late fees, and a negative mark on your credit report. What seemed like a smart deal can quickly spiral into unnecessary debt.
5. Long-Term Financial Burden
Splitting payments over 6, 9, or 12 months makes the purchase look smaller, but you remain tied to monthly obligations. This limits your ability to save or invest during that period.
A Real-World Example
Let’s compare the cost of buying a smartphone worth ₹80,000.
Option 1: Pay Upfront
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Base Price: ₹80,000
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GST (18%): ₹14,400
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Total: ₹94,400
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Upfront Discount: ₹10,000
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Final Price: ₹84,400
Option 2: Buy on No-Cost EMI
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Base Price: ₹80,000
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GST (18%): ₹14,400
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Total: ₹94,400
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Discount: None (since EMI option chosen)
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Processing Fee: ₹2,000
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GST on Fee (18%): ₹360
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Final Price: ₹96,760
In this case, the so-called “no-cost” option ends up being ₹12,360 more expensive.
Why Shoppers Still Choose No-Cost EMI
If it’s more expensive, why do people still go for it? The answer lies in psychology and affordability:
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Affordability illusion: Paying ₹7,000 per month feels easier than spending ₹84,000 at once.
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Instant gratification: People don’t want to wait or save up when they can buy instantly.
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Marketing influence: Aggressive advertisements make EMI sound like a smart financial decision.
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Real financial need: Some buyers genuinely don’t have enough funds to pay upfront and rely on EMI as their only option.
Advantages of No-Cost EMI (When It Works for You)
Despite its flaws, no-cost EMI can still be useful in some cases:
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It allows buyers with limited savings to purchase essential high-value items.
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The repayment schedule offers financial flexibility.
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Sometimes banks and e-commerce platforms offer additional credit card discounts even on EMI, which may offset hidden costs.
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For those with a steady monthly income and careful financial planning, it can be a manageable tool.
Smart Tips to Avoid Traps
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Compare Final Prices – Check the difference between upfront payment and EMI cost, including fees and GST.
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Look for Upfront Discounts – If paying directly saves you more, avoid EMI.
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Check Processing Fees – Always confirm if the bank is charging a fee.
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Pay EMIs on Time – Missing payments can damage your credit score and add penalties.
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Buy Only What You Need – Don’t let EMI offers tempt you into unnecessary purchases.
The Bigger Picture
E-commerce platforms like Amazon and Flipkart are not doing charity. Their goal is to maximize sales volume during festive seasons. No-cost EMI is one of their most effective tools:
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It encourages people to buy more than they otherwise would.
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It increases brand loyalty since shoppers get locked into long-term repayment cycles.
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It helps sellers clear inventory without visibly slashing prices.
For banks and credit card companies, EMI transactions mean more revenue through fees, GST, and interest adjustments.
The only stakeholder who risks losing money? The unaware consumer.
Conclusion
“No-Cost EMI” may sound like the perfect festive shopping hack, but in most cases, it’s a cleverly disguised marketing construct.
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You often pay more compared to upfront purchases.
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Discounts and cashback offers are sacrificed.
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Processing fees and GST add hidden costs.
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Your credit score and financial flexibility can be negatively affected.
That doesn’t mean you should never use EMI. For buyers who genuinely need expensive products and cannot pay upfront, it’s a practical option. But the key is awareness. Don’t assume “no-cost” means “no risk.”
This festive season, before you hit Buy Now on Amazon or Flipkart, ask yourself one question:
👉 Am I saving money with this EMI option, or am I paying extra for the illusion of affordability?
The smartest shoppers aren’t the ones who buy the most—they’re the ones who know exactly what they’re paying for.
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