Purchases made on EMI – Good or bad? (Yahoo Finance - BankBazaar.com)

When its festival time and you notice almost every other shop offering discounts and offers, you are tempted to go on a shopping spree and buy even things you may not need. But what happens to your liquidity at such times and how do you settle your credit card bills after the shopping? Merchant outlets and credit card companies recognize that this could be a concern to many shoppers and offer a scheme of payment by Equated Monthly Installment (EMI) in order to tap such customers as well and increase their sales. This is very popular in India for electronic appliances, mobiles, laptops and other gadgets. An EMI scheme means you can purchase the product and begin using it immediately, but pay the price over an extended period of time in installments. On the face of it, this scheme looks very attractive and easy on your purse. But there is no such thing as a free lunch. Let’s look at the extra costs you are likely to pay when you opt for an EMI scheme and what you should evaluate before you opt for such a scheme.

Costs to be borne while opting for an EMI Scheme:

Higher amount paid: Raj opted to purchase his mobile phone worth Rs. 40,000 through an EMI scheme offered by the retailer, which was in tie-up with his credit card company. The EMI was for 6 months, which should have technically worked out to a down payment of Rs. 4000 and 6 EMIs of Rs. 6000 each. But Raj discovered that he had to pay a down payment of Rs. 4000 and 6 EMIs of Rs. 6833 each. That is, he would have ended up paying Rs. 5000 more on the product if he had opted for the EMI scheme. This is because most EMI schemes come with a hidden cost, which is the interest you will have to pay.

Additional costs: Apart from the interest cost, most credit card companies charge a processing fee when you opt for an EMI scheme. This is a percentage on the transaction amount and varies from bank to bank.

Default in paying EMIs: The EMI amount will get reflected on your monthly credit card bills along with your other dues. So when you fail to make the payment of your credit card dues in a month, you will be charged the normal interest of anywhere between 24%-36% for non-payment along with the late payment fee and taxes. The EMI amount, in addition to being subject to these charges will also carry the basic interest cost thus causing a double whammy.

Absence of discounts: Often banks tie up with merchant outlets and offer the EMI option on various products. However, most products carrying the EMI option do not have the benefits of a discount or any offers attached to them. For example, an LCD costing Rs. 30,000 under the EMI option may be available at Rs.27,000 without the EMI option.

Pre-closure penalties: If you purchase a product on an EMI scheme offered by your credit card company, it is most likely that there will be a pre-closure penalty. This means that if you have the cash to pay off the entire amount before the completion of the total number of EMIs, you will have to pay a pre-closure charge, which is usually in the range of 2.5%-3% of the outstanding principal amount.

Things to evaluate before opting for an EMI Scheme:

As you can see, even though an EMI option may be light on your pocket, there are several costs attached to it. You must therefore evaluate the offer on the table before you opt for it. As a first step, remember to read the fine print thoroughly, as card companies can change terms at their discretion. You must also check if the total payment you are making, including all the EMIs and the down payment is equal to the MRP of the product or if it is more than the quoted price. If it is more, then it means you are being charged interest and/or processing fees for the option.

You must then check all options for the product in other stores – both online and offline, and see if you can get the product at a better price if you do not opt for EMI. If the difference is substantial, it is better to opt out of EMI.

Remember to consider the likely costs like pre-closure penalty when you evaluate the EMI option, as there are a few credit cards which offer zero pre-closure charges. This is because you should have the flexibility to close the scheme when you have excess cash. Also remember to consider how the existing credit limit on your card will change because of opting for the EMI scheme. When you use EMI on credit cards, your existing credit limit comes down to the extent of the outstanding amount.

Is an EMI scheme good or bad?

Although a good EMI scheme is easy on your wallet, you must try to avoid it as the first option. You may not only be spending more than the actual worth of the product, but also splurging first and then relying on EMI payments is not healthy for your finances. Remember to evaluate all costs associated with the scheme and then choose or reject it.

5 Common Estate Planning Mistakes To Avoid - Yahoo Finance (Business Insider)

Estate planning certainly isn't one of the sexiest ways to spend your day.

The idea of deciding how you'd like to die and who you'll leave your assets to can be overwhelming. 

That's why we like the idea of approaching estate planning like you would building a new home. Start with a solid foundation early enough in life, and then build it up one piece at a time. Once the roof is up and you've passed inspection, it's just a matter of trimming the hedges, changing a few light bulbs and renovating every once in a while. 

"There is no perfect estate plan," says CFP Nancy Anderson.  "We can’t plan for every contingency, but if we take some time to think about the major things, plan for them and double check that the right people are on the right documents, it can go a very long way in the end." 

Here are a few common estate planning mistakes to avoid: 

Thinking you're too young to make one. So, you're 33, fit as a fiddle and far too busy at your 9-to-5 to worry about something as dry as your estate plan — right? Don't kid yourself. You may not have many physical assets to your name yet, but a lot goes into estate planning besides deciding which of your siblings get first dibs on your vintage record collection. If you wind up in the hospital with no way to communicate, you'll wish you had designated a Power of Attorney to decide on treatment or at least jotted down how you'd prefer to be cared for at the end of your life.

Keeping your will a secret. Your life is not a Hollywood film. The idea that your family will pile into your attorney's office an hour after your funeral for the dramatic unveiling of your will is far from normal — or wise. In most cases, estate planners recommend telling your family exactly what they can expect before you pass away. Even if that means playing referee while your kids squabble over who gets your antique china set, it's worth dealing with the disagreements before it's too late for you to have a say.  "It's a double-edged sword; people don't want to communicate what property is going to be given because it could cause animosity," attorney Senen Garcia, founder of SG Law Group in Coconut Grove, Fla. told Bankrate.com. "It may cause animosity now, but you can deal with it. Later on, you have no control of it because you are gone."

Leaving too much cash to the wrong people. We'd all love to dump a pile of cash on our loved ones' laps after we pass away, but in some cases that's the worst possible way to leave a legacy. The key is to dole out money in a way that will improve their lives for the long-run. Using a trust fund can be a smart way to leave money to relatives, since it is administered by a trustee who must dole out the cash exactly how and when you tell them to. 

Forgetting about the blow from taxes. If you have considerable assets to leave behind, you'll need to carefully consider the estate taxes that will be levied against them. One way experts recommend getting around hefty estate taxes is to carefully plan ahead which assets you'll leave to certain family members and friends. You can "gift" them assets up to $13,000 per year while you're still alive under IRS guidelines before gift taxes kick in. 

Not editing your plan along the way. Life is far from predictable, which means your estate plan, like any financial plan, should be updated as your financial and personal circumstances change. Changes such as a birth, marriage, divorce, job loss, health condition, etc. all warrant factoring in to your estate plan. And beyond that, you'll have to seriously keep an eye on the ever-changing laws in both the state where your estate plan was drawn up and the country as a whole.

What are you waiting for? We recommend seeking a professional to help draft and review your estate plan. But don't just rely on one — both your financial advisor and your attorney (sometimes even in collaboration with each other) should be able to cover all the issues involved, making sure you've remembered to cross your T's and dot your I's.