No cost EMI a scam? CA warns why it can be a financial trap targeting middle class

A new phone, a bigger television, a renovated home, or even a car can suddenly seem affordable when the price is broken into neat monthly instalments. That is precisely why "no-cost EMI" offers have become so popular among Indian consumers. But according to chartered accountant Nitin Kaushik, what appears to be a convenient payment option may actually be encouraging people to take on financial commitments they would otherwise avoid. His recent post on X has sparked a conversation about debt, spending habits, and the hidden psychology behind EMIs.

CA Nitin Kaushik took to X and described no-cost EMIs as the "single greatest psychological scam" that has been weaponised against the Indian middle class. In his view, the problem is not the monthly instalment itself but the way it changes how people perceive the true cost of a purchase.

To illustrate his point, Kaushik used the example of a Rs 1.2 lakh iPhone. When that purchase is divided into twelve instalments of Rs 10,000, it suddenly feels manageable and accessible. However, he argued that this framing often prevents buyers from recognising the bigger picture.


According to Kaushik, consumers may overlook the fact that they are committing a significant portion of their disposable income to an asset that loses value over time. In his example, the buyer could be dedicating around 15% of their disposable income to a product that is rapidly depreciating.

What does his warning actually mean?

At the heart of Kaushik's argument is the idea that EMIs can make expensive purchases feel less expensive than they really are.

When people look at the total price of an item, they may hesitate. But when the same amount is divided into smaller monthly payments, the purchase often feels easier to justify. This psychological shift can lead consumers to focus on affordability per month rather than affordability overall.


Kaushik believes this creates a dangerous illusion. Buyers begin evaluating purchases based on whether they can manage the instalment instead of whether they can genuinely afford the product.

The problem grows when multiple EMIs stack up

Kaushik also highlighted what happens when consumers take on several loans simultaneously. A car loan, a consumer durable loan, and a home renovation loan may each appear manageable on their own. But when combined, they can consume a large portion of a person's monthly income.

He noted that once multiple EMIs are layered together, a person's paycheck can effectively be "spoken for" before it even arrives in their bank account. This leaves little room for savings, emergencies, investments, or unexpected expenses. Over time, individuals may find themselves trapped in a cycle where a significant share of their income is permanently committed to past spending decisions.

Why he calls debt a burden on your future self

One of the most striking parts of Kaushik's post was his observation that debt forces people to "borrow from your future, less certain self." The statement reflects a broader financial principle. When someone takes on debt for discretionary spending, they are assuming that their future income will be sufficient to cover today's purchase.

The risk is that life rarely unfolds exactly as planned. Job losses, medical emergencies, economic downturns, or unexpected expenses can make future repayments much harder than anticipated.

In that sense, debt transfers financial risk from the present moment to a future version of oneself that may have fewer resources or less stability.

The 'buy it twice' rule

Kaushik also shared a simple test that he believes can help people judge whether a purchase is truly affordable. His rule is straightforward: if you cannot buy an item twice over in cash without feeling financial discomfort, you probably cannot afford it.

The idea is not that people should literally purchase two of everything they own. Instead, it serves as a benchmark for financial resilience. If buying an item would significantly strain finances even once, financing it through EMIs may simply be masking the affordability problem rather than solving it.