Cardless EMIs: All you need to know

Traditionally, credit cards have enabled users to opt for purchasing products at no extra cost or documentation through an Equated Monthly Instalment (EMI) offered by specific merchants. Today, you have the option of an EMI card or even a cardless EMI. ICICI Bank recently announced a new facility for its customers. Does it mean you can avail credit without a credit card? Yes.

The bank had introduced an instant ‘Cardless EMI’ facility for retail stores last year to enable its customers purchase products of their choice in a completely contactless, digital and secure manner. Now, it has tied up with leading digital lending platforms like FlexMoney and ShopSe to offer this facility across 2,500 brands.

“With this, our customers can shop from over 2,500 e-commerce merchants and brands just by using mobile phone and PAN. The new offering improves affordability to millions of our customers as they can purchase high value products on EMIs and in a secure, convenient, instant and digital manner,” said Sudipta Roy, Head- Unsecured Assets, ICICI Bank.

Customers can convert the transactions up to Rs 5 lakh into easy monthly instalments by simply entering their registered mobile number, PAN and OTP (received on mobile number) at the check-out section of the e-commerce website or app. The facility can be availed across a host of categories such as electronics, home appliances, laptops, mobile phones, travel, fashion apparels, sports-wear, education and home décor.

How does it work?

While this facility was launched for POS transactions at retail stores during the last festive season, the bank has extended this facility to online shopping from this month. The loan amount for this facility can range between Rs 7,000 and Rs 5 lakh for tenures of 3, 6, 9 and 12 months.

“Even existing cardholders of ICICI Bank eligible for instant EMIs through their ICICI Bank cards can consider the ‘cardless EMI’ facility as an alternative, as long as the interest cost incurred through this facility is lower or equal to the interest cost incurred on opting for other credit or debit card EMI options offered by ICICI Bank or other banks,” said Sahil Arora – Senior Director at Paisabazaar.com.

ICICI Bank customers can avail the EMI facility in a digital, instant and secure manner. When you visit an online e-commerce platform which is a partner with the bank, you will see an option of cardless EMI at the payment stage. If you opt for it, you’ll be asked to enter your mobile number. Then an OTP will be sent on your phone. Now you have to enter this OTP and next fill the PAN number. If you’re a pr-approved customer with the bank, you’re EMI will be accepted otherwise it can be declined.

Here are simple steps to opt for the ‘ICICI Bank Cardless EMI’ facility:

Log on to the website/ app of any of 2,500 e-commerce brands

Choose the products or services > Choose ‘Cardless EMI’ as the payment option

Enter registered mobile number > enter PAN > enter the OTP

The transaction gets approved at this stage instantly

ICICI Bank customers can check their eligibility for ‘Cardless EMI’ for online shopping by sending SMS ‘CARDLESS’ to ‘5676766’ or check the offers section on iMobile app.

Should you opt for it?

One of the major advantages of availing the cardless EMI facility, according to Arora, is that its loan amount will not impact the credit limit of the credit card, thereby keeping the credit card limit free for making other card transactions or for availing credit card loans.

“However, those seeking EMI tenure for more than 12 months due to restricted repayment capacity should consider other EMI options available on their credit and debit cards, personal loans and consumer durable loans. These alternatives usually offer longer tenure, which will lead to smaller EMIs and thereby, higher affordability for the borrower,” he added further.

However, there are a few factors you need to keep in mind before you opt for it. Since this is facilitated by tie-ups with the merchant, there may be restrictions.

“For instance, not all products may available with a particular merchant or be covered under an EMI scheme. Second, different issuers have different terms and conditions. When you opt for ‘no-cost EMI’ schemes, then, depending on the product and the offer, you may not get certain upfront cash discounts associated with it. Else, depending on the products, offer, and issuer, you may have to make a down payment even if the loan availed is within your approved amount,” said Adhil Shetty, CEO, BankBazaar.com.

Like any other loan, buying a product on no-cost EMI needs to repaid on time in full. In case that does not happen, it can affect your credit score and bar you from further credit. So, unless you are sure about your ability to repay your loan, do not opt to buy products on no-cost EMIs.