What does a no cost EMI really cost? The hidden charges in rupees

Is a no cost EMI really free?

No. The bank still charges interest, and the merchant gives a discount or cashback equal to that interest. The discount cancels the interest, but not the GST on it or the processing fee.

HDFC's EasyEMI terms say the bank continues to charge interest. SBI Card's Merchant EMI terms call the booking an interest-bearing EMI plan.

The RBI's card directions, updated as on 1 October 2026, set the rule in paragraph 12(3). Before conversion, the bank must show the principal, the interest and the upfront discount, and show them again on the statement. An EMI with an interest component cannot be camouflaged as zero interest or no cost.

That paragraph covers commercial banks. NBFC card issuers have the same wording at paragraph 13(3) of the RBI's NBFC card directions, 2025, which SBI Card's grievance policy cites. The commercial bank directions exclude small finance banks such as AU and Equitas, and we have not read a version for them.

What does Rs 30,000 for 6 months at no cost actually cost?

About Rs 311 to Rs 611 in this example on SBI Card, ICICI and Axis listed terms. A higher rate or fee costs more. You pay Rs 5,000 a month for six months, and the extra is GST on the interest plus the processing fee with its GST.

An example. You buy a Rs 30,000 phone on a 6 month no cost offer with an SBI Card. SBI's listed 6 month rate is 17% a year. Assume the discount comes off the price at checkout. Six payments of Rs 5,000 at that rate repay a loan of Rs 28,566.95, so the discount is Rs 1,433.05 and the interest is the same Rs 1,433.05. GST at 18% on the interest is Rs 257.95. The fee is Rs 45, and GST on it is Rs 8.10. Total extra: Rs 311.05.

Campaigns can differ. ICICI says special campaigns can run at 9.92% to 20% with a fee of up to Rs 999 or up to 2%.

Our arithmetic from each bank's listed rate and fee: an amortisation of six Rs 5,000 payments. Axis is shown at the top rate in its Merchant EMI terms. Its EMI facility terms on the same page say 16% across all tenures at select stores and online merchants. ICICI is its rate for card machines in stores, with the 2.99% fee at its Rs 299 cap. This assumes the discount comes off the loan upfront. If it posts as cashback, interest runs on the full Rs 30,000: at SBI's 17%, an EMI of about Rs 5,251 and GST on interest of about Rs 271. SBI Card's terms describe interest on the total booking amount, with the discount posted to the card the same day. On a Rs 30,000 booking that makes SBI's total about Rs 324, not Rs 311. A real offer can differ, so check the payment page and the conversion SMS.

Why is my first EMI bill more than the EMI?

Because GST and the processing fee sit on top of the EMI. At SBI Card and HDFC, first-month interest also runs from the booking date to the first payment due date, so a gap over 30 days raises it. In the SBI example, the first month is about Rs 5,125.95: the Rs 5,000 EMI, Rs 72.85 GST on interest, the Rs 45 fee and Rs 8.10 GST on it.

The whole EMI counts in your minimum amount due at Axis, Kotak and SBI Card. HDFC, SBI Card and Kotak's EMI terms also block your credit limit for the full transaction amount and release it as instalments are billed and paid. Kotak's card agreement says the loan amount. A missed EMI brings the normal late fee and interest.

Our amortisation of a Rs 28,566.95 loan at 17% a year with equal monthly periods. Interest totals Rs 1,433.05 and GST totals Rs 257.95.

What processing and foreclosure fees does each bank charge?

HDFC, SBI Card, ICICI, Axis and Kotak charge a fixed or capped processing fee and 2% to 3% of outstanding principal to close early. Add 18% GST to each fee.

These are bank level terms, so they cover cards such as HDFC Millennia, SimplyCLICK SBI, Amazon Pay ICICI, Axis My Zone and Kotak White, unless your offer says otherwise. HDFC's MITC, updated 29 October 2026, says up to Rs 299, and its EasyEMI page says Rs 99 to Rs 699, so check the payment page.

Read at source on 31 October 2026, before GST. Rows are for EMI taken at the merchant where the document separates it. Kotak's figures are from its Instant EMI terms, and its card agreement says to check the Key Fact Statement. Canara's, IDBI's, Indian Bank's and City Union Bank's EMI rows do not split merchant EMI from other EMI.

Do I lose reward points on a no cost EMI?

Usually yes. HDFC, SBI Card, ICICI, Axis and Kotak say purchases on EMI earn no reward points, RBL says they earn no base reward points, and some take back points already earned.

SBI Card reverses points on converted purchases and does not return them on foreclosure. Axis debits points or cashback. Kotak reverses points already accrued.

A card earning 1%, our assumption, gives up Rs 300 on Rs 30,000, taking the SBI example to Rs 611.05. Use your own card's rate from its catalogue page.

EMI spends can also drop out of other targets: ICICI's annual fee waiver and milestones (MITC, last updated 9 October 2026), Axis's annual fee reversal on Select, Reserve, Magnus and Magnus for Burgundy, and HDFC's lounge spend condition.

How do I foreclose a no cost EMI, and what does it cost?

Ask the bank to close it, and expect a foreclosure fee, extra interest and often the loss of the discount. Paying extra into the card does not close it, as HDFC, SBI Card, Kotak and Canara all say.

ICICI's MITC says to contact its 24 hour customer care, and ICICI does not pass on the deferred EMI interest subvention confirmed at booking. HDFC takes requests by phone or the MyCards app, but not on the booking date or billing date, and debits any payback, instant cashback or discount within 120 days of pre-closure.

An example. Close the loan on the Rs 30,000 phone after two EMIs, on HDFC's terms at the same 17%. Principal left is Rs 19,311.25. The 3% fee is Rs 579.34, and GST on it is Rs 104.28, so Rs 683.62. HDFC debits the Rs 1,433.05 discount back to your card. You have now paid Rs 31,427.92 for a Rs 30,000 phone, before the processing fee, GST on two months of interest (Rs 133.98) and pro rata interest.

The bank can close it too. Axis can foreclose after two consecutive unpaid EMIs, and HDFC after three successive months of unpaid minimum due, with pre-closure charges.

Can I cancel a no cost EMI without a charge?

Only in a short window or after a full refund, and the rules differ by bank. ICICI and SBI Card also want the refund in one transaction, not in parts.

Axis reverses charges if you cancel a Merchant EMI within 7 days of conversion, but cancelling one with instant cashback counts as foreclosure. Kotak allows cancellation within 15 days, with the merchant cashback debited, though instant discount campaigns still carry foreclosure charges. ICICI waives foreclosure charges only on a refund received as a single transaction that is full or within Rs 1,500 of the original amount. HDFC cancels on a complete refund, debits the discount and keeps the processing fee. SBI Card allows cancellation only on a full single refund within 45 days of the transaction. It then reverses the fee and debits any discount.

Partial refunds can leave the EMI running. HDFC pre-closes only if the refund is more than 90.01% of principal outstanding, and SBI Card says partial refunds do not affect the booking.

Is converting a purchase to EMI later cheaper than a no cost offer?

Not at Axis Bank. Axis's transaction EMI terms list no merchant discount, so expect to pay the interest yourself. Carrying the balance costs more, up to 3.75% a month at SBI Card.

An example. Axis Bank's transaction EMI terms give 1.33% to 1.5% a month and, in the charges list, 18% a year, with a 2% fee. At 18%, convert Rs 30,000 for 6 months and the EMI is Rs 5,265.76. Interest is Rs 1,594.54, and GST on it is Rs 287.02. The fee is Rs 600, and GST on it is Rs 108. Total extra: Rs 2,589.56. Axis also bills initial interest from booking to the first payment due date. At 30 days that is Rs 450 plus Rs 81 GST, taking the total to Rs 3,120.56, against Rs 610.77 on Axis's no cost example above.

Paying the full statement by the due date costs no interest, provided previous dues are also clear.

Is a no cost EMI worth taking?

It depends on what your money earns and what you give up. In the example, the cost is about 3.6% a year on SBI Card's listed terms and about 7% at Axis Bank's top rate against cash paid today, and about 5% and about 9.9% against paying by card and clearing the statement a month later. If your money earns less than that after tax, paying outright costs less.

With 1% rewards lost, the card figures become about 9.9% and about 14.9%. Also compare prices: a seller who takes more than your extra cost off for paying outright beats the EMI on price alone. These rates assume the discount comes off the price at checkout, six equal monthly periods and a first payment one month out.

Before you confirm, read the principal, interest and discount the bank must show, then match them on your statement. If a line is missing, raise it with the bank and quote paragraph 12(3), or 13(3) for SBI Card.

Check that the discount has posted. Report an issue within 45 days of the transaction at SBI Card, 90 days for merchant cashback at Kotak and 180 days at HDFC.