Amazon No Cost EMI Explained: How It Works and What You Should Know

Discover how Amazon No Cost EMI works, its hidden charges, and its benefits. Learn if No Cost EMI is the best option for you in 2024, how it affects your credit score, and more.

Introduction

Shopping on Amazon just got easier with the No Cost EMI option, which allows you to purchase products without paying extra interest on installments. But how does this seemingly too-good-to-be-true offer really work? Are there any hidden charges? Let’s break it down.

What is No Cost EMI on Amazon?

No Cost EMI is a payment option available on Amazon that lets customers purchase high-value items like electronics or home appliances in monthly installments, without additional interest. Essentially, you pay only the product price spread over several months.

How Does No Cost EMI Work on Amazon?

When you choose the No Cost EMI option, Amazon partners with banks or financial institutions to split your payment into equal monthly installments, usually over 3 to 12 months. Here’s how it works:

1. Select No Cost EMI: While checking out, choose the No Cost EMI option. You will see the available EMI tenures.
2. Payment via Credit or Debit Card: No Cost EMI is typically available on selected credit cards or debit cards, though options like Amazon Pay Later might also be available.
3. Installments without Interest: The total price is divided into equal installments, and you won’t be charged any additional interest. The price you see is the price you pay.

The Secret Behind No Cost EMI

At first glance, No Cost EMI sounds like a free deal, but retailers like Amazon and the product sellers cover the interest that would have otherwise been charged. To balance this, they may either reduce the discount available on the product or bundle interest within the processing fees. So, while you aren’t paying extra, the cost is still factored into the deal in subtle ways.

Common Disadvantages of No Cost EMI

While it might seem like a great deal, there are a few things to watch out for with No Cost EMI on Amazon:

• Processing Fees: Banks often charge a processing fee, which is an additional one-time payment.
• Discount Reduction: Sometimes, using No Cost EMI means missing out on upfront discounts that would be offered with full payment.
• GST on Interest Component: Although the EMI is interest-free, you may still be charged GST on the interest amount, which adds to the overall cost.

Why Am I Charged Interest on No Cost EMI?

If you see an interest charge on what should be a No Cost EMI, it could be due to a misunderstanding in the calculation. While the EMI is advertised as “interest-free,” some sellers add GST on the notional interest or charge for processing the transaction. This is why it’s important to double-check the total payment breakdown before completing the purchase.

Is No Cost EMI Better Than Full Payment?

No Cost EMI can be a good option for spreading out the cost of a purchase, especially if:

• You don’t want to pay a large sum upfront.
• You can comfortably manage monthly installments.

However, full payment might still be better if:

• You’re eligible for significant upfront discounts.
• There are no hidden charges like processing fees in the EMI option.

Does No Cost EMI Have a Down Payment?

Typically, No Cost EMI on Amazon does not require a down payment. The entire product cost is split equally into monthly installments, with no need for an upfront payment.

Do No Cost EMI Options Affect Your Credit Score?

Yes, opting for No Cost EMI can affect your credit score positively or negatively, depending on how you manage payments. If you make timely payments, it can boost your credit score. However, missed payments could result in penalties and a lower credit score.

Who Bears the Interest in No Cost EMI?

The interest in No Cost EMI is either borne by Amazon, the bank, or the seller. They subsidize the interest to make it seem like you’re getting the product without any added cost, but the true cost might still be absorbed into the product pricing or other fees.

How Does Amazon Make a Profit from No Cost EMI?

Amazon profits through increased sales volume. The No Cost EMI option attracts customers who might otherwise hesitate to buy expensive products. While the seller or bank bears the interest cost, Amazon gains from increased transactions and possibly higher product pricing.

What Will Happen If I Don’t Pay My EMI on Amazon?

If you fail to pay your EMI on time, you may face:

• Late Payment Fees: Missed payments result in penalties.
• Interest Accumulation: For missed payments, interest starts accruing.
• Impact on Credit Score: Late or missed payments can negatively affect your credit score, reducing your chances of securing loans in the future.

Do We Have to Pay Extra in No Cost EMI?

While you aren’t paying extra interest in a No Cost EMI deal, you may still end up paying extra due to:

• Processing Fees.
• GST on the notional interest.
• Loss of upfront discounts that might be available with a one-time payment.

How is No Cost EMI Discount Calculated?

The No Cost EMI discount is calculated by factoring in the interest that the seller or Amazon would normally pay to the bank. This amount is usually absorbed into the product’s price or is balanced by reducing the amount of any other potential discounts.

How Does Amazon Pay Later EMI Work?

Amazon Pay Later EMI allows customers to make purchases without needing a credit card. Approved users can buy now and pay later in easy installments. You can choose the tenure, and depending on the product, it may offer both No Cost EMI and standard EMI options.

Conclusion

The No Cost EMI option on Amazon is a convenient way to finance your purchases without the burden of immediate full payment or additional interest. However, understanding the hidden charges, such as processing fees and GST, can help you avoid paying more than expected. Always compare full payment and EMI options to make sure you’re getting the best deal.