How Do Jewellery EMIs Work?
Buying jewellery on EMI allows you to take home your desired piece immediately while spreading the payment over several months or years. This has become a popular option for managing large expenses for weddings and festivals without paying the full amount
upfront. Typically, there are two main ways this works: a credit card EMI, where your bank converts a large purchase into monthly payments, or an in-store financing option offered by the jeweller, often in partnership with a bank or a Non-Banking Financial Company (NBFC). Many jewellers and even online platforms now offer these plans, with tenures ranging from three to 24 months.
The Myth of 'No-Cost' EMI
The term 'No-Cost' or 'Zero-Cost' EMI is a powerful marketing tool, but it's often misleading. The Reserve Bank of India has stated that the concept of zero-percent interest is non-existent. While it appears you are not paying interest, the cost is usually bundled into the transaction in other ways. Often, you forgo an upfront discount you might have received if you paid the full amount. Furthermore, banks typically charge a non-refundable processing fee. Perhaps the most overlooked charge is the 18% GST levied on the interest component. Even if the retailer provides a discount equivalent to the interest, you still end up paying tax on that notional interest amount, making the final price higher than the sticker price.
Cost Comparison: A Real-World Example
Let’s compare the total cost of purchasing jewellery worth ₹1,00,000 using different payment methods. Paying upfront costs you exactly ₹1,00,000. If you opt for a 'No-Cost EMI' on a credit card for 12 months, you might pay a processing fee of around ₹299 plus 18% GST. Additionally, you will pay 18% GST on the total interest amount that the bank has technically charged (before the discount was applied), which could add another ₹1,500 to ₹2,000 to your bill. Your total cost now is over ₹1,02,000. A standard credit card EMI at an interest rate of 15% per annum for 12 months would make the total payout around ₹1,08,300. A personal loan at 12% for the same tenure would result in a total payment of approximately ₹1,06,600. In every scenario involving credit, the jewellery costs more than its ticket price.
Smarter Alternatives to Buying on Credit
Before resorting to an EMI, consider other disciplined ways to buy gold. Gold Savings Schemes offered by major jewellers like Tanishq or Kalyan Jewellers are a popular choice. In these schemes, you deposit a fixed amount every month for a set tenure (usually 10-11 months). At the end of the term, you can buy jewellery worth the total accumulated amount, and the jeweller often adds a bonus equivalent to one month's instalment or offers a discount on making charges. This method promotes saving rather than borrowing. Another alternative for those seeking gold as an investment is to systematically invest in Gold ETFs or Sovereign Gold Bonds (SGBs), which are more cost-effective and do not involve making charges.
The Verdict: When Does EMI Make Sense?
While buying jewellery on EMI is almost always the more expensive option, it can be a practical choice in very specific situations. For an essential, non-negotiable purchase like wedding jewellery, an EMI can provide crucial financial flexibility when you lack immediate funds. It helps preserve your savings for other urgent needs or emergencies. However, it should be seen as a last resort rather than a default option. The convenience of taking home jewellery instantly comes at the price of interest and fees, which you could have avoided by planning and saving in advance. For any non-essential purchase, delaying the gratification and saving up is the more financially prudent path.
