The festive shopping season has arrived, bringing with it enticing offers and significant discounts from various online platforms. Promotions such as “Up to 80% off” and “Mega sale” are designed to encourage consumers to make purchases. While these deals may appear attractive, they often come with hidden costs that can impact the final expenditure. Consumers should be cautious, especially when considering payment options like credit card EMIs and Buy Now, Pay Later (BNPL) schemes.

Credit card EMIs allow shoppers to divide the cost of a purchase into manageable monthly payments, utilising their existing credit limit. Depending on the promotional offer, consumers may encounter interest charges or qualify for no-cost EMI options. In contrast, BNPL enables immediate purchases with deferred payments, which can be settled in full or in instalments. However, the terms and conditions associated with these options can vary significantly between providers.

It is crucial for shoppers to evaluate the total cost of borrowing rather than focusing solely on the attractiveness of smaller monthly payments. The overall expenditure, including interest, fees, and taxes, should be the primary consideration when selecting a payment method.

Comparing Credit Card EMIs and BNPL Options

When faced with the choice between credit card EMIs and BNPL, consumers should assess the total payable amount for each option. A lower monthly payment does not necessarily equate to a reduced overall cost; it may indicate a longer repayment period. For instance, a product priced at Rs 50,000 might attract an instant discount of Rs 3,000, reducing the price to Rs 47,000. However, if the EMI option incurs Rs 2,000 in additional charges, the effective saving may only amount to Rs 1,000.

Adhil Shetty, CEO of BankBazaar, emphasises the importance of comparing the final costs associated with each payment method. He notes that while credit card EMIs offer convenience, BNPL schemes can provide flexibility but may come with their own set of costs. Consumers should scrutinise the interest rates, processing fees, and any applicable taxes before making a decision.

Moreover, shoppers are advised to consider whether opting for an EMI or BNPL impacts their eligibility for other benefits such as cashback or reward points. This can further influence the overall value of the purchase.

Potential Pitfalls of No-Cost EMIs and BNPL Schemes

No-cost EMI offers are often marketed as appealing options during festive sales, yet they may not always be as advantageous as they seem. In many cases, the interest charges are compensated by discounts provided by the retailer, resulting in a smaller upfront discount compared to paying in full. Additionally, processing fees and applicable taxes can diminish the perceived benefits of such offers.

Consumers should carefully examine the total repayment amount when considering no-cost EMIs. It is essential to account for any upfront fees and to ascertain whether accepting an EMI option forfeits other discounts. For example, a 2% processing fee on a Rs 20,000 purchase could add significant costs when combined with GST.

Similarly, while BNPL can offer convenience, shoppers must be diligent in reviewing the terms, including interest rates and potential late payment penalties. A longer repayment period may appear manageable but can lead to higher overall costs due to accrued interest.

Ultimately, consumers should ensure that their repayment plans align with their budgets and financial commitments to avoid straining their finances during the festive season.

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