Pay-later, cards and no-cost EMI

“No-cost EMI” means the buyer repays the sticker price in equal instalments and no interest appears on the bill. The lender is still paid. Usually the seller funds the interest through a discount that the instalment buyer never sees.

What the rules say about cards

For credit cards issued by commercial banks:

• The breakdown must be shown first. A no-cost conversion must be presented “clearly indicating the principal, interest and upfront discount provided by the merchant/card-issuer (to make it no cost), prior to the conversion.”
• Interest cannot be disguised. “EMI conversion with interest component shall not be camouflaged as zero-interest / no-cost EMI.”
• The minimum due must not let the debt grow. The minimum amount due “shall be calculated in a way that it does not result in negative amortization.”
• Statements must warn about minimum payments. “Making only the minimum payment every month would result in the repayment stretching over months / years with consequential compounded interest payment”.
• Paying part loses the interest-free period. If less than the total due is paid, the “interest free credit period will be lost, and interest may be levied from the date of transaction on the outstanding amount”.
• Late fees wait three days. Late-payment charges and reporting to credit bureaus apply “only when a credit card account remains ‘past due’ for more than three days.”

An older statement, for history

In 2013 RBI wrote to banks that “the very concept of zero percent interest is non-existent”, and that in card EMI schemes “the interest element is often camouflaged and passed on to customer in the form of processing fee.” That circular is often quoted. It was addressed to banks, and we could not confirm that it remains in force after RBI consolidated its regulations in November 2025. The card rule above is the current, checkable one.

What is not settled

• No-cost EMI is not banned. We found nothing that says so, and you should be wary of anyone who claims it.
• Plans that are not on a bank card. Shop finance and app-based pay-later plans from NBFCs are loans, and the general rules on the Key Facts Statement and digital lending apply to them. We did not find an RBI rule written specifically for “buy now, pay later” as a product.
• A commonly repeated 2022 instruction about loading prepaid wallets from credit lines: we found only a law firm’s account of it, not an RBI publication, so we do not rely on it.

The practical test

Ask for the price if you paid in full today. If it is lower than the sum of the instalments, the difference is the interest. If there is also a processing fee, add it. The EMI calculator will tell you what rate that amounts to.