What is No-cost emi? Any hidden charges/process?

[Ssreek]

So we were looking for a tv and the model we chose has some cashbacks with credit card full swipe and Debit card no-cost emi. Both of these ways, the cashback remains same and they said will be credited in 3-4 months.
I never bought anything with no-cost emi. Usually emi means, they will add processing fee+gst initially and then convert the amount to emi's in certain number of months along with interest.
But with no-cost emi, one store said only 299 processing fee, another said 399+gst blah blah...

Can someone tell me if there are any hidden charges? Is this a reliable process or should I stay away from it?

Note: This question might have been asked by someone else in the past, but in my case store people are confusing us with cash back vs interest on emi and we need to clear this confusion before purchase.

 

[rockstah]

Afaik there's no charges or processing fees and how it works is you'll be given an upfront discount for the interest amount in your purchase price and that discount amount will be collected as interest split between the emi duration.

 

[Ssreek]

Afaik there's no charges or processing fees and how it works is you'll be given an upfront discount for the interest amount in your purchase price and that discount amount will be collected as interest split between the emi duration.

So here the Rs.4k cashback means, they will charge interest with emi's and then give it back as cashback, right? If that's true then there is no discount at all here..
Only through credit card full swipe we can get discount I guess (cashback in 120 days).

 

[rockstah]

So here the Rs.4k cashback means, they will charge interest with emi's and then give it back as cashback, right? If that's true then there is no discount at all here..
Only through credit card full swipe we can get discount I guess (cashback in 120 days).

Sorry can't understand what you're saying, cashback will be credited to your account as you said after 120 days

 

[Mr.J]

@Ssreek Can you share the link so we can directly see what's mentioned on there?

 

[Ssreek]

Sorry can't understand what you're saying, cashback will be credited to your account as you said after 120 days

Sorry I wasn't clear..

Let's say the product is 60k...
Convert to 6 months no cost emi. As per this, it has to be 10k * 6months.
But as per your earlier comment, what I understood is, there will be interest, so that instead of 10k * 6months, it could be some 11k * 6 months. I'm just assuming 1k as interest.
So now as per the cashback, they will post 4k in 120 days...So 6k interest we paid, but 4k got as cashback..

This is what I understood from your comment. Correct me if I'm wrong.

@Ssreek Can you share the link so we can directly see what's mentioned on there?

Not able to find the tv in reliance website with exact model...
Here is a similar cashback offer for a product.. Link
Let me know what additional charges are there if we take nc-emi.

 

[Mr.J]

Not able to find the tv in reliance website with exact model...
Here is a similar cashback offer for a product.. Link
Let me know what additional charges are there if we take nc-emi.

You are entitled for an additional cashback of Rs.5000 on your card.It will be posted in Customer account within 120 days from the last date of the transaction month on a best effort basis to all open and active card members accounts only,Convenience fee of Rs.299 and GST will be charged instead of Rs.199 and GST for this EMI transaction. on HDFC Bank Debit Card using Debit Card

Ok, so if you buy this phone with HDFC debit card then you'll be paying (full price+299+gst) upfront and will receive cashback of 5000 after 120 days.

I don't see any hidden charges. And while that can be a concern, sometimes such offers are given to attract/retain customers. Pretty sure HDFC might be receiving some payment from the store when their cards are used to make payment.

 

[Ssreek]

Ok, so if you buy this phone with HDFC debit card then you'll be paying (full price+299+gst) upfront and will receive cashback of 5000 after 120 days.

I don't see any hidden charges. And while that can be a concern, sometimes such offers are given to attract/retain customers. Pretty sure HDFC might be receiving some payment from the store when their cards are used to make payment.

But it says "Debit card EMI"...how does this emi work with debit card?

 

[greenhorn]

one catch is that these things are going to be linked to your CIBIL score. One missed/late payment and you'll wish you hadnt taken that loan

 

[superczar]

So we were looking for a tv and the model we chose has some cashbacks with credit card full swipe and Debit card no-cost emi. Both of these ways, the cashback remains same and they said will be credited in 3-4 months.
I never bought anything with no-cost emi. Usually emi means, they will add processing fee+gst initially and then convert the amount to emi's in certain number of months along with interest.
But with no-cost emi, one store said only 299 processing fee, another said 399+gst blah blah...

Can someone tell me if there are any hidden charges? Is this a reliable process or should I stay away from it?

This is a workaround used to offer financing discounts after some RBI regulations.
The cashback is independent so dont bring that into the mix.

If you do full swipe, you pay say 100K and thats it.
If you take a no cost emi, the bank will charge applicable interest on your EMIs but the total applicable interest would be discounted upfront on the product price. So say if interest applicable for the purchase is 8K for a 6 month tenure, your card will be charged for 92K and your card statement will carry 100k/6 each month.

You do however pay a little extra - in the example above, you will still have to pay 18% GST on the interest component each month - so your net outgo will be approx 100K + 0.18*8K + some small processing fee vs 100K on full swipe

 

[Ssreek]

This is a workaround used to offer financing discounts after some RBI regulations.
The cashback is independent so dont bring that into the mix.

If you do full swipe, you pay say 100K and thats it.
If you take a no cost emi, the bank will charge applicable interest on your EMIs but the total applicable interest would be discounted upfront on the product price. So say if interest applicable for the purchase is 8K for a 6 month tenure, your card will be charged for 92K and your card statement will carry 100k/6 each month.

You do however pay a little extra - in the example above, you will still have to pay 18% GST on the interest component each month - so your net outgo will be approx 100K + 0.18*8K + some small processing fee vs 100K on full swipe

Thanks for the explaination...
So cashback is a bonus then ?

 

[letmein]

Thanks for the explaination...
So cashback is a bonus then ?

https://www.reddit.com/r/IndiaInvestments/comments/eiuq3e

 

[superczar]

cashbac

Thanks for the explaination...
So cashback is a bonus then ?

The cashback is in a sense ireelevant - you get it regardless of whether you take the EMI or not.

Purely from a financial sense, it usually makes sense to opt for a no cost EMI regardless of whether you can pay for it upfront or not

 

[Mr.J]

But it says "Debit card EMI"...how does this emi work with debit card?

Same as credit card EMI works.
Amount will be taken from your account on monthly basis.

 

[pauldmps]

The only hidden cost of no-cost EMI is the 18% GST that you have to pay on the interest.

 

[Mr.J]

But is it really hidden cost if they're mentioning it straight up?

 

[powervgx]

This has been already discussed. Is there any way to pin such important posts and not to repeat the entire discussion again?

But is it really hidden cost if they're mentioning it straight up?

The 18% GST on interest is not mentioned anywhere.

 

[Ssreek]

Thanks to everyone who explained this clearly..appreciate the help

 

[sanjeevram]

In no-cost EMI- The Bank gives the interest as discount Upfront
So suppose you Buy a phone for 20000/-, The Emi w/o interest would be 3333.33/- for a six month tenure. The total interest might be say 2000/-
So you get the 2000/- discount while you purchase the product the card is only charged 18000/-. The 2000 interest is charged over a course of six months.
The hidden cost is you often pay a processing fee of 199+GST for say HDFC or SBI CC, and 18% GST on the interest payment which might amount to 350+ in the above case.
So you pay 550 rupees plus as hidden charges on above scenario

 

[t3chg33k]

cashbac

The cashback is in a sense ireelevant - you get it regardless of whether you take the EMI or not.

Purely from a financial sense, it usually makes sense to opt for a no cost EMI regardless of whether you can pay for it upfront or not

It is not really that black and white. It some scenarios you might end up paying 9-20% more and the article below gives a good idea.

How a Zero Cost EMI Actually Costs 9% - Capitalmind

You've heard of the zero-cost EMI, no? You have to buy something, and instead of paying for it now, you just pay for it over 6 months. That's awesome, correct? But it turns out there's something more sinister now. From a zero cost EMI, you are likely to be paying…

www.capitalmind.in

Thanks to everyone who explained this clearly..appreciate the help

I opted for a no-cost EMI only once because there was a discount available for no-cost EMI and not for upfront purchase. At the end of it, for a 10k product with 10% discount, I ended up saving around 250 bucks (for a 3-month EMI) which was probably still okay considering the alternative was a "no discount". However, ICICI failed to remove the EMI for several months from my CIBIL report and I had to eventually file a complaint with the RBI ombudsman to get the inactive EMI removed, so in the end it was not worth the hassle.