Is Zero-Cost EMI a Scam? The Hidden Costs You’re Not Told About Zero-Cost EMI

Buying a new phone or appliance on EMI has become very easy. With “zero-cost EMI” offers now common in both online and offline stores, many Indians prefer paying in instalments without any extra cost. But is it really free—or just a smart way of selling credit? 

Here’s a closer look at how zero-cost EMIs work, and what you should watch out for.

What is a Zero-Cost EMI?

A zero-cost EMI allows you to divide your purchase into monthly payments without paying any interest. For example, instead of paying Rs 30,000 at once, you can pay Rs 5,000 every month for six months. These offers are usually made possible through partnerships between banks, brands, and retailers. They are popular for buying things like smartphones, electronics, education services, medical treatments, and even travel. 

Also Read: Your EMIs To Get Cheaper As RBI Announces Jumbo Rate Cut - Top Developments | Republic World

How Do Lenders Benefit?

In most cases, the brand or seller covers the interest to boost sales. But there's a catch—customers often miss out on upfront discounts. For example, if a fridge costs Rs 30,000 on EMI, the same model might be available for Rs 28,000 if paid in full. To put it the other way, you’re paying the full MRP in exchange for “no interest.”

• Probable hidden costs 
• Even if the EMI is interest-free, there may be extra charges, like: Processing fees (typically 1–2%)
• GST on the interest (even if it’s subsidized)
• Prepayment penalties
• Limited return or refund options
• Moreover, your credit limit may also be blocked for the full amount during the EMI period.

Where all is it offered?

Zero-cost EMI is widely offered on Amazon, Flipkart, Croma, and through banks like HDFC, ICICI, SBI, and NBFCs like Bajaj Finserv. They’re useful if you need to buy something essential and prefer to pay in multiple instalments.

Bottom Line

Zero-cost EMIs are easy to use, but they’re not always truly free. Always compare the EMI deal with the full payment price, read the terms carefully, and look out for any hidden charges. Use it as a smart way to pay—not as a reason to spend more than you need to.