Payment Schemes [Personal Finance]

Back in the days of yore, before plastic money was all the rage and banks were all over the place, people bought stuff in a straightforward way. You figured out what you wanted, saved up the money needed to pay for it, forked it out up-front and brought your newly acquired stuff home! Plain and simple.

Then came along the financial institutions with credit facilities. You didn't have to bother saving for what you wanted, just so long as you were “credit-worthy” enough for the goods you were looking to buy. All you had to do was make a down payment, a promise to pay the rest over a fixed number of installments and then you could take your new stuff home! This is popularly known as the EMI (Equated Monthly Installments) scheme.

Problem with this approach is that over a period of time, people started basing their expenses on their ability to pay the installments rather than being able to afford the actual price of the product. Combine that with the effect of increased imupulse purchases and soon you're paying for a house-full of mostly un-necessary crap.

Now comes the new trend of an even more ridiculous payment system. Pre-Orders! Essentially, you are not given a product (or in cases even shown a live product), but asked to pay full price for it upfront and wait for the manufacturer / dealer to ship / deliver the product in the weeks / months to come. This is IMHO the most stupid way to pay and is a conspiracy by manufacturers to take power away from the consumers. How do they do that you say? They take away your freedom of choice! What if, say a week after the pre-order I come across a better product? Can I cancel and get a full refund? What if I don't like the product when I finally receive it? Will it be worth the wait? Do I get to return it and claim a refund?

The ideal way to buy, my friends, is the old fashioned way. Save up and put your cash down up front and pick up your product of choice. Here are some of the key benefits:

1. The wait while you save up thwarts any impulse purchase tendencies

2. Having full cash for payment upfront might offer you leverage to bargain with the seller

3. You get to fully examine and try out the product before you part with your money.

4. The feeling of achievement that you get since you had to “work” towards your buy. :)

So there you have it... my 2 cents! Go forth and "spend it"! :P