Do no-cost EMIs seem too good to be true? Turns out they just might be

It’s the festive season, you log in to an online shopping app to look for that new dress or a flagship phone, and it turns out nothing is beyond reach since you can pay for it in parts, with no-cost EMIs. The deal to pay just the price of a product without any interest on installments, even if it comes at the cost of a big discount that you could’ve bagged by paying up front, seems too good to be true. It turns out that there’s more to these no-cost staggered payments than meets the eye.

Are you really getting a good deal?

So when you add multiple gadgets and gifts for friends and family to your cart, thinking that it won’t be heavy on the wallet thanks to EMIs, the e-commerce platform is working with banks to ensure credit for you. While there’s no interest being charged on these payments upfront, the banks do charge a processing fee for each EMI, and that’s where they slip in the interest. So you do end up paying more than the actual price of the product, without even realising that interest has been charged.

What do regulators say?

Even the RBI has acknowledged in a circular in 2013, that no-cost EMIs are non-existent and that such schemes are only aimed at alluring customers, so that they end up buying more and paying more at the same time, while interests are camouflaged.

In the process of securing the convenience of having only a small part of your monthly bills being deducted for big purchases, you also end up losing out on discounts. For anyone who’s been shopping online for a while, it’s also clear that discounts are anyways applied on the maximum rates of the product along with delivery charges. So you end up paying more for that high end accessory or an expensive gadget through EMIs, while you could’ve bagged one of those for a smaller price.