Hidden cost in No Cost EMI
EMI is one of the beneficial things that banks offer on our credit cards. During the old days when credit cards were not a thing, there was still an option available to buy things using EMI. It was mostly handled manually where we had to pay the monthly value with interest and principal directly to the seller. Now banks act as an intermediate person between the seller and the buyer and they see a small profit in this business. People who use the EMI server are in need of the item but they cannot afford it immediately though they can afford it in the course of a few months.
This is where people see some advantages. People love to purchase things using EMI where they can enjoy the benefits of the product and own them before even they can fully buy that product. I personally have done this with lots of items. Today if I purchase something I become happy and later I can worry about paying the money. All I have to worry is to see if can afford the monthly installment or not.
In the last few years, I have been seeing many banks offering No-cost EMI while purchasing something. From the looks of it, we might think that this is a great thing and we would jump straight to purchase things using this option. In a way we have to take a deeper look into this and understand if they really are giving us things without an extra cost or not. The first important thing to note here is how they are paying us the interesting. Some offer options where they deduct only the amount without including the interest rate for the tenure we select.
Processing fee
The real details about the purchase will always be only the statement we receive on the credit cards. Not all the EMI options but most of the EMI schemes have a processing fee on the EMI transaction. I believe this is something similar to taking a loan. So probably that is why there is this processing fee. I recently bought a new laptop on an online store and used a free No-cost EMI option to make the purchase and when I looked at the bank statement, I noticed a processing fee. I'm mostly sure that they did not reverse the cost of the processing fee. This is more like a hidden cost that we would be paying based on our purchase value.
IGST charges
These are the next charges that were introduced in the last few years. Before that, I have never seen a deduction on GST in the EMI transactions. Later when it was introduced, I have seen two entries one for state GST and another for central GST but these days I'm able to see only one GST entry in the bill caled IGST. I believe these are also some hidden charges that are apart from the regular interest we pay for the EMI. When they say No Cost EMI, they only reverse the interest amount we pay but on top of that these values are something that we end up paying. Based on the value of the product we purchase this is going to differ.
If you like what I'm doing on Hive, you can vote me as a witness with the links below.
Vote@balazas aHive Witness
Vote@kanibotas aHive Engine Witness