Credit card no-cost EMI is not completely free:Processing fee 18% GST put extra burden on your pocket; check 5 facts before shopping

Across the country, people are making extensive digital payments on e-commerce platforms and at stores during Diwali to buy clothes, electronics, firecrackers and gifts. To avoid making a large payment at once, many are choosing the no-cost EMI option on credit cards. If you are also considering the no-cost EMI option for shopping with a credit card, wait, because “no-cost” does not mean completely free here. The processing fee, 18% GST and the loss of an instant discount can make your purchase considerably more expensive. 1. The extra burden of the processing fee Many banks and credit card companies charge a separate processing fee when you choose the no-cost EMI option. This fee can range from ₹99 to ₹500 or more. Even if you do not have to pay interest, this one-time fee makes your purchase more expensive. 2. 18% GST on interest and fees Under no-cost EMI schemes, the merchant or bank often deducts the interest amount from the product’s price as a discount, but technically, the bank charges interest on the transaction. As per the rules, GST is levied at 18% on the EMI interest and processing fee, and the customer has to bear this cost. 3. Loss of upfront and instant discounts During the festive season, banks offer instant discounts of 10% or up to ₹1,500 directly on credit card purchases. When you choose the ‘no-cost EMI’ option, you often do not receive this flat discount. In such a case, the product would cost you less if you made the full payment than if you bought it on EMI. 4. Pre-closure and Foreclosure Charges If you want to pay off your credit card outstanding before the EMI tenure ends, the bank may charge you foreclosure or pre-payment fees. These charges can generally range from 2% to 5% of the total outstanding amount, with 18% GST also applicable. 5. Credit Limit Blockage and the Impact on Overall Debt As soon as you convert a purchase into an EMI, the full price of the product is blocked from your credit card’s total limit. As you pay each monthly instalment, the corresponding portion of the limit is released. In addition, opting to buy every item on EMI because the monthly instalment appears small can disrupt your overall monthly budget. What Should You Do for Smart Shopping? Experts advise against making purchases during festivals solely because of the small instalments. Before choosing any offer, compare the full payment with the final bill, including the processing fee, taxes and any discounts you may have forgone. The right deal is one that fits your budget and does not leave you burdened with debt after the festival ends. Knowledge section: How does no-cost EMI work? Banks cannot legally offer loans at 0% interest. Therefore, under a no-cost EMI scheme, the merchant-the shopkeeper or e-commerce site-gives you a discount on the product’s price equal to the interest charged by the bank. However, the customer has to pay 18% GST on this discounted interest from their own pocket.