Payments · 2 October 2026
No-Cost EMI Explained: How It Works for Customers and Merchants
No-cost EMI lets a customer split a purchase into monthly instalments without paying more than the product price. The bank still charges interest, but the merchant or brand covers it, usually by giving an upfront discount equal to the interest. The customer may still pay GST on the interest or a processing fee.
How no-cost EMI works
- The customer chooses no-cost EMI at checkout and picks a tenure, such as 3 or 6 months.
- The bank or lender converts the purchase into EMIs with interest.
- The merchant or brand gives a discount equal to that interest, so the total equals the product price.
- The customer pays the EMIs each month on their card or loan.
What customers should check
- GST charged on the interest part of each EMI.
- Any processing fee charged by the bank.
- Whether the no-cost price is the same as the normal discounted price.
- Which cards, banks and tenures are eligible.
Why merchants offer no-cost EMI
Running these offers needs a system that knows which bank, card, product and tenure each offer applies to and shows the right price at checkout. An offers engine does this without code changes for every campaign.
- Higher conversion on expensive products.
- Larger average order value.
- Co-funded offers with banks and brands that lower the merchant's own cost.
Frequently asked questions
Is no-cost EMI really free?
The interest is covered by the merchant or brand, but the customer may still pay GST on the interest and a processing fee, so check the final amount.
Can I get no-cost EMI on a debit card?
Some banks offer debit card EMI to eligible customers. Availability depends on the bank and the merchant's offer.
Who pays the interest in no-cost EMI?
The merchant, the brand, or both, usually through a discount equal to the interest.