Hidden Charges / GST on NO-COST EMI:

Did you know you have to pay 18% GST on Credit Card Interests, including NO-COST EMIs?

Maybe most of you already know it, but still, I find many members here are unaware of this. So making this post for everyone.

NO-COST EMI is marketed as 0% Interest, 0% EMI processing fee, but the fact that 18% GST is still charged is often concealed.


Regarding Credit Limits:

The product amount (excluding Interest & GST) will be temporarily deducted from your Credit Limit. Hence, your credit limit should be more than the product price.

If the product price exceeds your total limit then these outcomes might happen:

  • Your Transaction may get declined by your bank. (Especially if the product price is too high)

  • Your bank may provide you a loan amount over and above your credit limit, and you will be charged interest rates on that too. (Not all banks offer this, such as HDFC Bank)

Both are not-so-good options. So, you may try out these:

  • You may approach the bank to offer you a temporary increase in credit limit. Banks may agree based on your credit history. HDFC Bank does offer a temporary credit limit increase, click here to know how to ask them.

  • You may approach consumer loan providers like Bajaj Finserv, Kotak Consumer Finance, etc. who can offer you increased credit lines for your purchases depending on your credit score. They also provide NO-COST EMIs. However, you may miss out on the bank offers / discounts / cashback that comes bundled with the bank cards.


Debit Card EMI:

The same policy also applies to Debit Card EMI transactions. The only difference is that since it’s a debit card, it does not ‘block’ your ‘bank balance’ like a ‘credit card’ blocks ‘credit limits’. You will be charged monthly, so make sure you have a sufficient amount in your bank by the billing period each month.

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