by Vinaya HS on February 9, 2010
in Finance
Because the bank has the right to dip into your savings and settle your credit card dues. An extract from HDFC Bank’s Most Important Terms & Conditions for Credit Cards (version 1.23) reads:
Right of Lien
The bank, at any time and without notice, will have lien and right to set-off all monies belonging to the Cardmember and/or add-on Cardmember standing to their credit in any account/custody of the bank, if upon demand by the bank, the balance amount on the card account is not repaid within the prescribed time.
Could be a sticky issue especially when you have any disputed and unresolved credit card transactions. To play it safe, it’s a good idea to avail a credit card from a bank where you don’t keep your other savings.
What do you think? What has been your experience in this matter?
Tip Tuesdays is my initiative to share practical personal finance tips — every Tuesday. I’d be delighted if you could share a tip or two from your own experiences. Drop a comment to submit your tip. And, as always, do spread the word if you find this useful.
by Vinaya HS on February 6, 2010
in Finance
You might be wondering why your credit card dues simply keep spiraling out of control. The basic reason for this is that once you fall into the trap of not paying your outstanding dues in full, the bank levies all kinds of fees, interest, and finance charges and then tries to recover these before applying your payments towards settling actual transactions.
Credit card payments are first applied to all overdue amounts (the oldest due being credited first) in the following order:
- Fees and other Charges
- Interest
- Balance Transfer Amount Billed (if applicable)
- Cash Advances Billed
- Retail Transactions Billed
- Balance Transfer Amount Current (if applicable)
- Cash Advances Current
- Retail Transactions Current
No wonder then that your credit card dues simply do not end — it pushes you further and further into debt. And all it takes is one part payment (anything less than the total amount due) to set you on this downward spiral.
by Vinaya HS on February 5, 2010
in Finance
Here’s a detailed tutorial from the Reserve Bank of India (RBI) on how to identify genuine rupee-denominated currency notes.
My observations:
- It’s not possible for the common person to identify a counterfeit note on first glance. How often have you stopped to verify the genuineness of the currency in your hands?
- Banks themselves have started using ultraviolet (UV) lamps to detect counterfeit notes. It’s interesting to see the teller closely examine each note you handover (when you deposit cash), but not do the same with the notes handed back to you (when you withdraw cash).
- How good an idea is it to keep in each bank branch a public UV lamp that customers can use to identify the genuineness of their currency?
What do you think?
Awareness Fridays is my initiative to spread awareness on topics relevant to personal finance — every Friday. I urge you to take some time off and absorb this information — it’s pretty useful. And, as always, do spread the word if you find this useful.
by Vinaya HS on February 4, 2010
in Finance
by Vinaya HS on January 29, 2010
in Finance
This is a guest post from Shilpa at Under the Rainbow. Though Shilpa claims that “she knows zilch about financial planning,” her posts always prove the opposite. In this post she explains why you really ought to be careful when you act as a reference for someone else’s financial dealings.
I learned this lesson the hard way. A colleague of mine wanted a personal loan and asked me if he could use my name and number as a reference. Having known him for a long time, I agreed. A few months later he quit the company, quit the city, and changed his mobile number. We lost contact.
And then started a slew of calls from the bank wanting to know his whereabouts. Since I had no idea, I said so but the calls didn’t stop. Even now, after more than two years, I get these calls when I am in the middle of a meeting, driving, or trying to put my baby to sleep. Each time a different person calls and I have to explain the situation all over again.
No amount of mails, scraps, and pokes have yielded any response from this colleague. I do not want to change my mobile number because of someone else’s wrong doing. Sigh! I guess I’ll just have to answer these calls until the bank marks this colleague as a defaulter and forgets him.
In this day and age, you really need to be careful about who you act as a reference for.
Awareness Fridays is my initiative to spread awareness on topics relevant to personal finance — every Friday. I urge you to take some time off and absorb this information — it’s pretty useful. And, as always, do spread the word if you find this useful.
by Vinaya HS on January 5, 2010
in Finance
That depends on where you are right now into the tenure of your loan, but the general answer is “as early as possible into the tenure of the loan.”
EMIs for personal loans — or any loan in general — are structured such that the interest component of the EMI forms a significant portion of the EMI early into the tenure of the loan. For example: in the first EMI for a personal loan of INR 300,000 at 18% over 36-months, the interest component constitutes nearly 41.50% of the EMI amount! At the end of 12- and 24-months, the figures are 31% and 17.60% respectively.
For this loan, at the end of 12-months, you’ve already paid 52.40% of the total interest payable (if the loan were to be serviced over its full tenure). Since there’s a significant amount of the interest yet to be paid, it would make financial sense to pre-close the loan at this point (even after including the pre-closure penalty).
However, at the end of 24-months, you’ve already paid 86.90% of the total interest payable. It would therefore make little sense to close the loan at this point — you have no significant financial advantage in doing so.
Look at these factors when you’re thinking of pre-closing your personal loan and decide appropriately. You might find this Personal Loan EMI Calculator handy.
Tip Tuesdays is my initiative to share practical personal finance tips — every Tuesday. I’d be delighted if you could share a tip or two from your own experiences. Drop a comment to submit your tip. And, as always, do spread the word if you find this useful.
by Vinaya HS on December 31, 2009
in Finance
Thought I’d end the year with this valuable quote from The Simple Dollar:
The real problem with any debt is the interest you have to pay. That interest is basically a huge price for impatience — one of our most dangerous human impulses.
That said, have a great year ahead with your personal finances.
Happy New Year.
by Vinaya HS on December 30, 2009
in Finance
I’ve experienced first-hand and also repeatedly advised acquaintances and readers of this blog, the benefits of having independent health insurance — health insurance that’s not tied to your employment — for yourself and your dependents.
However, amidst all the events that have happened in my life in the past few months, I let my own health insurance lapse. I simply forgot to renew it — it’s another matter though that the insurance company conveniently forgot to remind me.
A reminder that personal finance is not a one-time activity. It’s a lifelong journey. And the onus is on you to be in charge.
What do you think?
by Vinaya HS on December 29, 2009
in Finance
Six months back, I’d complained that,
While one can request for a copy of one’s credit report while applying for credit, what about those who’re not inclined to avail credit right away. How then does one access one’s credit information report? What about those who’ve already availed credit facility? Surely, they’d like to know their credit scores too.
Here’s some great news — you can now apply for and obtain your credit information report from CIBIL. A quick extract reads,
You can now access your Credit Information Report (CIR) directly from CIBIL. As you may be aware, your CIBIL CIR is a factual record of your credit payment history compiled from information received from credit grantors. The purpose is to help credit grantors make informed lending decisions — quickly and objectively, and enable faster processing of your credit applications to help provide you speedier access to credit at better terms.
Read the sections under the menu heading “Your CIBIL Credit Report” for a thorough understanding. I plan to apply for and obtain my CIR in the coming week. Let me know if you’ve been able to obtain yours.
Tip Tuesdays is my initiative to share practical personal finance tips — every Tuesday. I’d be delighted if you could share a tip or two from your own experiences. Drop a comment to submit your tip. And, as always, do spread the word if you find this useful.
by Vinaya HS on December 28, 2009
in Finance
It’s been a long break from the world of blogging. So many events have happened in this time — my marriage, my trips to Devarayanadurga, BR Hills, K. Gudi, and Rajasthan, and the Swift breaching the 19,000 kilometer mark to name a few.
I’d like to thank everyone who wrote to me asking about my whereabouts. This blog wouldn’t be a success without you. I’ve also received a good number of personal finance queries and I will address these in the coming days.
That said, it feels great to be back. Stay tuned for more from the intricate world of personal finance.
by Vinaya HS on August 4, 2009
in Finance
I have had the unfortunate privilege of owning a HDFC Bank 3-in-1 Account (Savings, Demat — linked to Savings, and Trading). The Demat and Trading accounts were used for a grand total of two transactions. The Savings account saw a token amount being deposited, then saw the two transactions, and then saw a zero balance. To date, I have no idea why I opened this account. I closed the Trading account by handing over a simple letter at the base branch. The Demat account couldn’t be closed because it was linked to the Savings, which therefore needed to be closed first.
Here’s how you can close your HDFC Bank Savings Account:
- Reduce your account balance to zero.
- Take a photocopy/scan of your debit card (for backup and safety).
- Take a photocopy/scan of the first and last unused check leaves in your checkbook (for backup and safety).
- Go to your base branch (where you opened your account).
- Fill out an account closure form.
- You’ll be intimated of your account closure by post. If you don’t receive any intimation within a week or two, call customer care and confirm account closure (keep your Customer ID and Phone Banking PIN handy).
- Tear-up your unused check leaves, debit card, and any other leftovers.
Any balance leftover in the account after closure will be returned via. demand draft. Uncredited interest amount, if any, will be accounted for in this reimbursement.
Here’s a pictorial view of the end of my HDFC Bank Savings Account.
Tip Tuesdays is my initiative to share practical personal finance tips — every Tuesday. I’d be delighted if you could share a tip or two from your own experiences. Drop a comment to submit your tip. And, as always, do spread the word if you find this useful.
by Vinaya HS on August 3, 2009
in Finance
Interesting statistics published by the Reserve Bank of India on the number of forged/counterfeit notes detected by the Indian banking system.
by Vinaya HS on August 3, 2009
in Finance
In response to my post about guidelines on detection and impounding of counterfeit notes at Indian Banks, a reader asks,
Has anyone got a fake currency note through an ATM? What is the process to be followed in such a case? Does the bank keep track of each and every note fed into the ATM?
With most banks outsourcing to a third-party the loading of cash into ATMs, I’m not sure where the accountability and audit trail lies. I’ve never faced such a situation. How about you? If you have, what did you do?
by Vinaya HS on July 31, 2009
in Finance
Have you ever pondered over questions such as “What’s the interest rate payable on my Savings or Current Account balances?” or “What happens if I opt for a premature withdrawal of my Fixed/Term Deposits?” or “What happens to an account that I no longer operate?” etc., then this Master Circular on Interest Rates on Rupee Deposits published by the Reserve Bank of India is a must read for you. Spend some time with this material and increase your knowledge on how the most commonly used financial instruments work.
Awareness Fridays is my initiative to spread awareness on topics relevant to personal finance — every Friday. I urge you to take some time off and absorb this information — it’s pretty useful. And, as always, do spread the word if you find this useful.
by Vinaya HS on July 29, 2009
in Finance
A reader writes,
I have been banking with Citibank for the past ten years. They’ve now deducted Rs 250 for not maintaining a minimum balance — without even intimating me. Now, Citibank often calls me offering credit cards and other unnecessary stuff, but they never bothered to call and inform me that they were going to levy a penalty because my salary was no longer being credited to this account. Pathetic service. Have decided to close this account.
In case you want to close your Citibank savings account, you’ll find my experience handy.
by Vinaya HS on July 28, 2009
in Finance
I often get emails that read,
I want to invest in so-and-so financial instrument so that I can avoid paying income tax. Do you think this [financial instrument] is a good option? Alternatively, can you suggest other financial instruments that will further help me avoid paying income tax?
In my opinion, paying income tax and investing in a financial instrument ought to be independent and mutually exclusive actions. You should invest in a financial instrument only if it helps you achieve your financial goals — and no, “I want to avoid paying income tax” is not a financial goal.
Pay income tax. Define your financial goals. Invest in the right financial instruments; if a financial instrument does qualify for income tax deductions/exemptions, you just got the best of both worlds!
What do you think?
Tip Tuesdays is my initiative to share practical personal finance tips — every Tuesday. I’d be delighted if you could share a tip or two from your own experiences. Drop a comment to submit your tip. And, as always, do spread the word if you find this useful.
