The Curious Case of Saraswat Bank

I have banked with Saraswat Bank for over 6 years now. The banking relationship started with me applying for a Home Loan, and was then extended to other products such as Personal Loans and overdrafts. I have visited multiple branches across 4 cities and interacted in my capacity as a customer with officials across businesses and technology and have a fair idea of the customer experience offered by Saraswat Bank. Initially, I was amazed at the very competitive interest rates they offered [10% for Home Loan and 12% for Personal Loan], but it was only later reality dawned and I was shocked at how this bank operates with little respect of customer trust, information security and borders on violating RBI guidelines. Before I elaborate further, I should highlight that I still bank with them [albeit with much caution] because there is an emotional bond being a Saraswat and the branch managers and the staff have always been helpful and welcoming and have tried to help me to the best of their capabilities and have frankly admitted to the process related faults as well, however I think it is important to highlight certain facts and concerns, so that all existing customers and prospective customers are aware of the pitfalls of banking with them. These are my personal experiences and I have tabled these formally and informally at several levels in the bank, however there has been little improvement and hence this article. I also acknowledge that other cooperative and private banks may also operate in a similar fashion, but customers should have zero tolerance to poor service from any banks irrespective of it being a private, MNC or PSU bank.  

I would like to state at the outset that most of the customers of Saraswat Bank is 50+ years. I have rarely seen any younger customers at the branch which I used to visit and still visit when I am in Mumbai [Bandra East] and most people seemed to be in the 50+ age group with limited knowledge of emerging technologies and would trust the branch manager profusely, attend Pooja's in the bank branches and treat the branch staff as their extended family. This background is important as this is a set of customers who are very trusting and will pretty much believe what you say as a branch manager without batting an eyelid. I have narrated 5 instances which point to a complete lack of processes at the bank which should have customers very worried - so I hope you get a fair idea of the potential risks of banking with them. 

[1] Misleading (bordering on duping and cheating) Customers on the Savings Bank Interest Rate 

The Reserve Bank of India deregulated the Saving Bank Interest Rate and promptly Saraswat Bank increased the Savings Bank Interest Rate to 6% p.a. (up from the earlier 4%) There were huge banners on Western Express Highway in Mumbai and several other prominent locations marketing the Interest Rate increase to 6%. I have seen the Branch Manager convince an elderly couple [who I am sure treated her as their daughter] to move balances from another Bank to Saraswat Bank highlighting the 6% rate while the other bank was offering only 4%. For 3 months that the rate was 6% all the branch managers and sales staff went into overdrive and mopped up deposits from their unsuspecting family of customers. I am guessing a record number of accounts were opened and significant balances were moved into Saraswat Bank by unsuspecting customers.  

Promptly after a few months, to my utter shock,  the rate was dropped to 4% once again without informing these very customers who had moved balances. RBI guidelines state that whenever there is change in the Fees and Charges, the customers need to be informed at least 30 days in advance and the onus is on the bank to make the best possible effort to communicate the fee change to customers across multiple channels. I have worked for Citibank and Indusind Bank and am a customer of ICICI and HDFC as well and I receive messages in my statement and letters at my mailing address informing me of the change in rates. The compliance processes in these banks are very strong and they ensure that the customer is communicated via SMS, e-mail, statement, physical mail etc. Some of them even display it on their ATM Screens.

However all Saraswat Bank did was put a ticker on www.saraswatbank.com page which stated that the interest rate was revised back to 4% from the previous 6%. This would have been done 30 days prior to the change - but I am confident that less than 1% of the impacted customers would have noticed it and most of it would still not be knowing that they are not getting the interest rate that they thought they were getting. While what Saraswat Bank did is not in the spirit of the RBI guideline I urge customers to be very aware of such matters and raise a voice against the bank. I was not impacted by this, but I know several customers were and they were very upset with this. But being senior citizens - did not have the energy or inclination to follow up on it, and this is precisely what Saraswat Bank takes advantage of.   

[2] Sham of an Elite Gold Banking Account 

Saraswat Bank launched an Elite Gold banking Account a while back with a minimum balance of INR 100,000 and with a host of moth watering features. It is to be noted that Private banks and MNC banks which offer awesome services across channels have a lower minimum balance so I thought that the feature set offered on this account would definitely blow me away. The branch manager also gave me a call inviting me to a discussion on this product (given that I was one of the few younger customers of the branch who would be excited by an "eStatement", "Birthday SMS" and " Premium Debit Card" which were called out as salient features. She presented me with a feature set of 20+ points and made a full on sales pitch of why it was the perfect product for me and my wife. Other than a Birthday SMS and a Birthday Call from the Branch Manager which were a first for me in my 7 year banking career, the other features included a premium debit card, waiver on some car loan processing fees, door step banking services such as cheque pick up, e-statement delivery etc. After seeing the last feature which was "Birthday SMS" and "Birthday Call from Branch Manager" I thought that I should experience this product and to be frank I was in need of e-statements and cheque pickup and drop facility and I was anyways banking with them so it made sense to upgrade my account (or so I thought). I promptly cut 2 cheques of INR 100,000 each and handed it over to the branch manager who was almost jumping in glee seeing a fresh convert. My accounts were opened and I called the branch for my premium debit card only to be informed that  most of the product features were not yet launched. 15 out of the 20 features would be launched in the coming year and Saraswat Bank was incorrectly trying to mop up deposits. This again is very incorrect and violates the RBI guidelines at some level. But given that very few Saraswat Bank customers were interested - I though the impact of this would be limited and did not care too much beyond a point. I landed up cancelling the account within 2 days of opening it. However, they may try to pull this stunt in the future (or any other bank may try) so please beware. 

[3] Data Security huh? What is that?  

If you call any of the Saraswat Bank Branches and give an account number they promptly start rattling of the balance information and sensitive details of the customer such as Name, Address, PAN etc. I have experienced this multiple times when all I give is the account number and I am able to extract all information. The calls are not taken on recorded lines, there is no validation of the customer which is done, funds transfer requests are taken over phone. The Internet Banking Helpline does all kinds of account linkages etc. over phone without ay audit trail of the request coming in from the customer. the list is endless. Please go ahead and try for yourself. This trend is across branches. As I have family members across all branches, I have seen this across over 5 branches. This would be a fraudsters paradise. All you need is a customers account number or name and all the other details will bve provided by the every helpful staff of Saraswat Bank. be scared! Be very very scared! Given the kind of banking fraud that is carried out from foreign shores - Saraswat Bank is a sitting duck for fraud. 

[4] Why does Internet Banking need to be secure? 

When I initially opened the account [2008], I had requested for Internet Banking Passwords. Despite repeated requests they were never mailed to my address. I had already placed 3 written requests at the branch but nothing happened. So I went into the branch managers cabin on a Saturday morning and expressed frustration at the turn of events. To my surprise, the Branch Manager called up the Vashi office of Saraswat Infotech Limited where the technology team sits and instructed them to generate a fresh PIN. Within 15 minutes the Internet PIN was printed / generated and communicated over telephone by the technology guys to the Branch Manager and by the Branch Manager to me. The Branch Manager expected me to be thankful that my Internet Banking PIN was instantly generated, without realising that both he and the technology guy knew what it was and could go ahead and empty my account upto the transaction limit of Rs.50,000. He simple did not get the importance of the PIN security. When I asked him in shock he dismissed it saying that I could go home and change it and told me to leave his cabin dissapointed that I did not compliment him for the heroic act. Also if you call the Internet Banking Helpline in Saraswat Info-tech Ltd., they entertain all kind of requests on phone as long as you speak in Marathi. You can pretty much link customer IDs, get Internet Banking Passwords on phone etc. etc.  

[5] Operational Procedures which make you want to faint!   

When a Joint Account is opened by 2 people, it can configured to be operated in "JOINT" mode or in "EITHER OR SURVIVOR" mode. My wife and I opened an account in EITHER OR SURVIVOR mode which means that either one of us can operate the account. When a cheque is signed either one of us can sign the cheque. However recently I needed to reissue the Internet Banking passwords for myself, so I went to the branch to write an application, the submission of which was promptly refused. It was not refused due to a signature mismatch or any other valid reason, but because they wanted me to have the password reissue request signed by my wife as well. For moving funds out of the bank account via cheque I need only 1 signature, but for an Internet banking password reissue Saraswat Bank has mandated joint signatures, which I am sure is a FIRST in the banking industry in India. When questioned, the branch manager and staff is not able to offer any valid explanation and point to some circular which has come from the central office. All of us in India follow some stupid process - especially at airport security where we are forced to go through multiple redundant checks, but those familiar with banking will agree with me that this takes the cake. 

So I encourage all customers to consider all the above points before choosing to bank with Saraswat Bank and if you are already banking with them - do read the above and evaluate if you want to continue. I would like to reiterate that the staff is very sweet and very helpful, they have teated me like their son for the last 7 years and these are people I really like and whom I meet on the road, bump into them at the super market and some of whom I have known for years. The problem is more systemic, so I am hoping that several customers will reference this blog and go to the management and ask for process changes to be implemented so that customer impact is minimized. Being a proponent of financial literacy and awareness - I thought the correct thing to do was write about it and leave it at that. 

Banking Tip: Foreign Exchange for Travel Abroad

Whenever you travel abroad, you are bound to require Foreign Exchange for all your spends abroad. There are several merchants / banks waiting to fleece you when you go to them for your Foreign Exchange Transactions. Do note that forex revenue is a major source of revenue for banks and it is just a question of who makes the least money of you as compared to which is the best the deal for you.

When you travel abroad, you will have 3 options for foreign exchange which are listed below. I have clearly listed out the merits and demerits of each option and clearly stated the option which is best (or least worst) for the customers. Please go through this article and pass on the messages to all your friends who frequently travel abroad.

Option 1: Go to a Money Exchanger on the Airport (Worst for Customer)
This is by far the worst option. I was travelling from Mumbai to Hong Kong recently and the Bank Rate for HKD is as follows 1HKD = 6.1 INR. The rate quoted at the airport was 1HKD = 7.8 INR. Please note that this is more than a 20% mark up and is completely unheard off and these guys are completely fleecing you. To make things worse handling charges of Rs.150 are additional to this. The rate offered at airports abroad and at any money exchangers are slightly better (Mumbai airport is by far the worst I have seen) so you may think of using those. However whenever you travel abroad please be aware of the rack rate. In today’s information age you cannot let other people make money off your ignorance.

Option 2: Use your Credit Card Abroad
Using a Credit Card at a Money Exchanger is no different from using the money exchanger themselves; you are acting even more stupid and paying the Credit Card foreign exchange fee in addition to the 20% or so margin. You could not be more stupid.

However you are better off if you directly spend abroad on your Credit Card. The Exchange Rate that gets applied to your transaction is the approved VISA / Master Card exchange rate which is about 1% over the rack rate. In addition to this your Credit Card Company levies a Foreign Exchange Fee ranging between 1% and 5%. While I am aware of SBI Card offering their Platinum Card with a Forex Fee waiver, and Barclaycard charging 3.5%, I have not heard of any credit card issuer charging in excess of 3.5%.

In such a case if you spent HKD 100 the exchange rate applied would be Rs.6.3 (instead of the Rs.7.8 applied by Money exchangers but higher than the Rs.6.1 rack rate). Hence the Transaction amount would be Rs.6300 and I would pay an additional 3% which would be the Foreign Exchange Fee which would be approximately Rs.200 with Service Tax. Hence the effective Exchange Rate will be Rs.6.5. This is a good option and users should start using this option as compared to money exchangers.

Option 3: ATM Withdrawals from Indian Bank Account (Best for Customer)
This is the best option to get foreign exchange. I am sure all of you have Bank Accounts and Debit Cards with Banks in India. I have with Citibank and ICICI Bank and have validated this with both the Banks. The Debit Cards issued by these Banks are International Debit Cards and have a VISA / VISA Electron / Master Card / Maestro Logo displayed on them. These can be used at any ATMs abroad which have these Logos. When you withdraw money through the ATMs, the rate which gets applied is the rack rate and you get a flat fee for International ATM Withdrawal Transaction which is approximately Rs.150 + service Tax. This means that you land up paying a flat fee of Rs.150 and Service Tax for the Foreign exchange transaction. For low transaction amounts of Rs.5000 and below Option 2 makes sense, however for any transaction which is more than Rs.5000 this option makes the most sense.

I have illustrated the same through examples. If I want 1000 HKD to be converted for Travel to Hong Kong, the bank rate being 1HKD = Rs. 6.1

Option 1: I need to pay the Money Exchange Rs.7800 + Handling Charge of Rs.150 = Rs.7950. The effective Exchange Rate becomes Rs.7.95
Option 2: If you use your Credit Card for 1000 HKD, you have a Credit Card transaction at a premium rate of Rs.6.3 which gives a transaction amount of Rs.6300 and in addition to this a Credit Card Fee of 3% which is approx Rs.200 with Service Tax. The effective Exchange Rate becomes Rs.6.5
Option 3: If you Use your Bank Account, you pay Rs.6100 + Rs.150 + Service Tax and the effective Exchange Rate is Rs. 6.3 which is by far the best option.

I sincerely urge all readers to send this articles to all friends and family who travel abroad frequently as we cannot have all these merchants making money of our ignorance. If you feel this article makes sense the next time you save money by following the tips stated above, please donate a part of the sum saved to charity.

For any queries or feedback do write back to Ask.Pranav@Gmail.Com and I will try to write back to you as soon as possible.

Feature Review: Payment Protection Insurance

Most Credit Card Issuing Banks offer an Insurance feature on their Credit Cards which may be Life Insurance, General Insurance or in some cases may be a specialized form of Life Insurance which is called as “Payment Protection Insurance”

What is Payment Protection Insurance also known as Credit Shield Plus Insurance?

This insurance ensures that if you die while holding your Credit Card, then the entire Credit Card outstanding whatever it might be at that time will be paid by your Insurance Company and will not have to be borne by your family / dependants / legal heirs.

In 99% of the cases I do not recommend this product as it is useless and I have observed that most banks (at lease the credit card issuers I have worked for) do not follow up with the family of the deceased card holder and just write off the out-standing. The fact that if you die, the bank will chase your family is untrue, at least to my knowledge. While they are legally empowered to do it, they do not do it as far as I am aware.

In addition to this, it may happen that at the time of your death that you do not have any Credit Card outstanding at all and hence the entire premium that you have paid has got wasted. I would recommend this card only if you are a perpetual revolver and your Credit Card outstanding at any given point of time is more than your monthly take home salary, then you can think of going in for this product.

The premium amount is usually less than 0.1% of your Monthly Outstanding and gets billed in your Credit Card statement every month. If you have an outstanding of Rs.30000 every month you will have to pay a Premium of approx Rs.30 every month. While this may look like a small amount, this is an expense you can avoid and donate this money to “needy children” which would be putting it to better use.

If you do apply for this product, you will open yourself to complaints such as incorrect premium billed, changes in the premium rates, non receipt of policy documents and in most cases your family will not even be aware that you have this insurance policy.

You need to keep it in mind that the bank will keep calling you and keep saying that “after taking this insurance you can live in peace knowing that your family is secure etc.” but that is all crap. Remember from the Rs.30 that you pay every month, the bank will get Rs.10 from the Insurance company and hence you give your Bank Rs.100 per year. If they manage to sell this product to 100,000 customers, they will get Rs.1,00,00,000 which is waster money going to the bank coffers.

This is a totally useless feature of most Credit Cards, so please stay away from it.

If you have any queries or suggestions, you can write to me at Ask.Pranav@Gmail.Com and I will write back to you as soon as possible. Thanks.

Market Outlook: Future of Credit Cards in India

In the current scenario, almost all banks which issue Credit Cards are bleeding financially and are not able to sustain themselves. A simple generic model of the Profit & Loss Account of the

Credit Cards Business is given below.

For every Rs.100 lent to customers by the Bank the following are the income and expenses

Revenue Streams

(1) Rs.20 is the Interest Income earned by the Bank on an annual basis (average across portfolio)
(2) Rs.2 is the other income earned through transaction & merchandising revenue

Costs

(1) Rs.9 is the Cost of Funds
(2) Rs.5 is the Acquisition Cost of sourcing the Card
(3) Rs.3 is the Operational Cost
(4) Rs.3 is the Bad Debts (Customers not paying back money and going delinquent)

So if you calculate for every Rs.100 lent out you have revenue of Rs.22 and a cost of Rs.20, which gives you marginal profit of Rs.2 for every Rs.100 lent out. However this was the case about 3 years back when the Bad Debts were restricted to 3%.

Last year the bad debts have soared to as much as 12% which is Rs.12 for every Rs.100 which have been spent and hence the costs go to Rs.29 which the revenue still remains at Rs.22, so as a result the banks make a loss of Rs.7 for every rs.100 lent out. This loss cannot be sustained and as a result the banks have taken the following steps

(1) Cards issued to customers who have a flawless Credit History and who will definitely pay back on time and hence reduce the percentage bad debts and make the business more profitable
(2) Tighten Credit Policy to issue Cards to reduce Bad Debts. Not to issue cards to customers who do not have a proven Credit Record

The way I see it, the Credit Cards Business in India will be profitable in India only under the following scenarios. If these scenarios are not met then I do not see the sense in banks issuing Credit Cards at all – a view which is echoed by many in the Financial Services space and is disputed by an equal number of people as well

(1) The Acquisition Cost has to come down from Rs.5 to Rs.2. This will happen when the banks move away from the current model of DSA Agent Based sourcing and move to Internet Sourcing with no face to face visit with the customers. However there are Technical and Regulatory hurdles preventing this from happening right now
(2) The Bad Debts should not exceed 2% to 3%. This needs to be managed through effective Credit Policy which ensures only those customers get Cards who have an ability to pay back. This restricts the number of Cards issued by the bank as most customers who can afford to pay back have already got a Credit Card. New entrants will get all the sub-prime customers where if you issue cards, the losses will also rise
(3) Banks need to increase revenue by cross sell effectively on the Credit Cards base. This means that they will need to start doing merchandising activity on the Credit Cards Base and use the Credit Cards Base to sell Loan products, Bank Accounts, Investments and Insurance to beef up the Non Interest Income and increase the same from rs.2 to Rs.5

Until the banks develop a strategy on the above mentioned lines, it will be very difficult for the Credit Cards Business to be profitable at all. The financial model used above as an example is indicative and does not represent any specific bank profit and loss account.

If you have any queries or suggestions, you can write to me at Ask.Pranav@Gmail.Com and I will try to write back to you as soon as possible.

Customer Awareness: Most Important Terms and Conditions for Credit Cards (MITC)

Whenever you apply for a Credit Card, you are subscribing to the Most Important Terms & Conditions of the Credit Card Company at the time of applying for the Credit Card itself. These most important Terms & Conditions are mostly the same across Credit Card Issuers and usually state the following major points.

(1) Tariff Schedule is covered as the last part of the MITC. This gives your Rate of Interest (also known as APR in Credit Card circles) Late Payment Charges, Cash Advance Charges, Fuel Surcharge and all the other charges. It is recommended that you go through this list of charges to avoid nasty shocks at a later date
(2) It is to be noted that if there is any change in the MITC, then the bank has to inform customers at least 30 days before effecting the change. The bank will communicate to you as a part of the Statement Message on top of the statement or through a separate letter sent to your mailing address. If the bank does not do this, and changes your charges in an ad hoc manner then you can write to them for a Charge Reversal and escalate your Complaint to the Banking Ombudsman as well
(3) Other, than the schedule of charges, the MITC also contains a declaration that you authorize the bank to contact you for any offers that they may deem suitable for you. Some application forms like Deutsche Bank and SBI Card have a section which allows you to opt out of any calls and messages. You may choose to check the same. However, I recommend that you should opt for promotional messages as sometimes during festival times, the banks come out with good offers which you would not like to miss
(4) On a lighter note, the bank does not verify the number entered by you. You can change your Mobile Number later and change it to someone you really want to harass and the bank will start directing calls to the new mobile number updated by you. Believe me, the banks do not have a check to prevent this
(5) The MITC also states that they will provide your data to the Credit Bureau (CIBIL) from time to time which gives your spend data, late payment data and non payment data. This is an important point as you can ruin your future life because of this. Please note that now in India we have a CIBIL Score and hence any late payment / non-payment made by you will reflect across all banks and they will refuse to lend to you if you have a bad score. What this means is that you will need to take extra care that you make your payments on time, else you will have your record ruined. It does not matter if you are arguing with a bank for the reversal of charges etc. once they report you (which happens automatically end of month) you are finished. I would sincerely recommend that instead of fighting with the bank over a few hundred bucks it is better to pay up and keep your Credit Score in tact
(6) The MITC also gives other information such as the Payment Modes for making Payments to the Banks and other good to know features on your Credit Card

Please make sure you read the MITC of the Credit Card at the time of applying for one. Do not bother asking the Sales Representative, as they usually do not have a clue (they are usually paid per application and hence they are keen on picking up the application however complete, incomplete it may be.

Mark my word, if you do not read the MITC and are not an aware customer, your ignorance is going to come and bite you at a later date. Credit Cards are very useful and I strongly recommend them as a Financial product, however only informed users should use them.

If you have any queries or sugestions, you can write to me at Ask.Pranav@Gmail.Com and I will try to revert back to you as soon as possible.

Product Review: Deutsche Bank Gold Credit Card

The one thing that stands out about Deutsche Bank is a customer focused approach across all their products. I rate them at the top on Customer Service. Their Contact Centre is best in class with executives who have good communication skills and know what they are talking about, and hence managing your Credit Card relationship is a pleasure. I would recommend this card primarily for the ease of Banking with them.

The positive aspects of this card are as follows

(1) Outstanding Phone Banking and Internet Banking Platform with well trained staff making information access very easy. If you compare this to some poor quality contact centre’s such as Barclays & ICICI, you will understand what I am talking about and the difference it makes to the Customers life
(2) Awesome festive offers, they have gives Rs.10,000 Cash back on Rs.1,00,000 of spend in the festive months of Oct to Dec for the first 100 customers or so and the lucky draw of a Maruti Swift as well. Their regular round the year offers are nothing to write home about, but these festive offers definitely make take the card worthwhile
(3) The charges and interest rates are better than the others in the market and my personal view is that this is the bank which is least likely to take the customers for a ride with unfair charges being levied to customers
(4) Their Operational processes are sound, the statements reach you on time and payments get credited on time. They have launched payments through Quick Pay and NEFT Payments for Credit Cards which enables you to make Payments through different banks on the Internet
(5) They do not have a massive Outbound Calling Team for stupid offers such as Loans and the Customer is left in peace to use his Card. This is a major irritant in banks such as Citibank, Barclays and ICICI where you will get at least 3 calls a week if you have not registered for the “Do Not Call Registry”

The negative aspects of this card are as follows

(1) The Card Plastic Is not unique and is not designed very well at all. They let you change images on the Credit Card at a small fee, however none of them are unique like the Times Barclaycard which you would like to show off to your friends
(2) Regular offers are not as good as the festive offers that are offered on this card

All in all, I recommend this card, however their Card Issuing Policy is very tight and for the past year they have been issuing cards only to a select group of customers. Feel lucky, if they have actually issued you a card.

Feel free to write to me at Ask.Pranav@Gmail.Com for any clarifications that you may have and I will try to respond to you as soon as possible.

Clarification on Payment Due Date for Credit Cards

Just a few days back I read an article in the Times of India pertaining to the confusion on Credit Cards Payment Due Dates. Having worked in the Credit Card industry, I thought it would help if we threw some light on the subject.

All Credit Card Issuing banks have 2 payment dates.
(1) Print Due Date: This is the Payment Due Date which is communicated on the customer statement. This is the date communicated to the customers, by which the payment needs to be made
(2) Actual Due Date: This is usually between 2 to 5 days after the Print Due Date. This includes 2 to 5 days of grace period which the bank gives for the cheques which have been dropped on the Payment Due Date to Clear and for the clear funds to reach the credit card issuing bank

In most cases customers drop cheques on the Payment Due Date as communicated on the statement. If the cheque is dropped in the drop box as communicated by the bank on the payment due date, it gets picked up the next day and sent for clearing. The payment gets credited to the Credit Card only after 2 or 3 working days depending on the clearing period and if it is an outstation cheque or not.

If the Banks start levying the fat late payment fee of Rs.500+ if the payment does not reach them by Print Due Date, 80% of the customers would get charged and the call centre would get calls that we have dropped the cheques on time – how dare you charge us etc. This is the reason why the due date configured on the bank statement is different.

However, if you use Internet Banking, NEFT to make Credit Card Payments, they reflect instantaneously as they do not need to go through the cheque clearing process and hence the customer will not get charged even if he makes a payment a bit late after the print due date and before the actual due date.

Late Payment Charges are a major source of revenue for credit card issuers, and this revenue line is monitored at the highest level. There is a monthly target for Late Payment Fees and strict guidelines for Late Payment Fee Reversals as well. Most banks will reverse out the Late Payment Fees the first time … however will be very strict after that. However if you spend more than Rs.20000 on your Credit Card every month and have been paying back regularly, then your bank will not want to lose you as their customer and you can get them to reverse the fee sighting some reason or the other.

However, I suggest that you make your Credit Card Payment in time, however if you have forgotten, the first time you will be excused, but after that you jolly well start paying the fees. You need to be responsible – if you take your bank for a ride, be rest assured, they will take you on a ride as well.

For comments, suggestions and queries, you can write in to Ask.Pranav@Gmail.Com and I will write back to you as soon as possible.

This is the season for Hidden Charges on your Credit Card

Over the last few months Indian Credit Card Issuers are going through a tough time on the inability of the customers to pay back the money that they have spent on the Credit Card. The whole model of the Credit Card industry has been turned up-side down. This has happened due to the following reasons.

(1) Tremendous Sales pressure within the banks has forced them to give Credit Cards to sub- prime Customers, customers who do not have a proven ability to pay
(2) Some banks have even given Credit Cards to customers who do not know what a Credit Card is, and hence do not know they need to pay back (sounds funny isn’t it!)
(3) About 3 years back, the banks on an average would lose Rs.3 for every Rs.100 lent out as bad debt, not that number is Rs.15 for every Rs.100 lent out
(4) This is a 12% reduction in the profit margin, which was anyways between 3% to 4%, and now the companies are heavily in loss

As a result banks are issuing fewer credit cards and to make the business more profitable have increased the fees and charges, hoping to make more fee revenue. Therefore it is very important to pay attention to the revised fees and charges communication that you would receive from the banks. It would also do you good to check the revised fees and charges communication on your Bank website.

Just a few pointers to what has happened in the market over the last year

(1) Barclays has raised the Late Payment Fee from Rs.300 to Rs.500 to Rs.600 to I think Rs.1000 for some tier of customers (I agree they have been very transparent which was their launch tagline ….. and I have received 4 badly printed inland letters communicating the changes)
(2) HSBC has done away with the fuel surcharge of 2.5% which was waived for the customer and if you want a fuel surcharge waiver they have introduced a fee of Rs.349 or so which will make sense only if you have fuel purchase in excess of Rs.12000 per year
(3) HSBC has introduced a transaction charge on making Credit Card Payments through HSBC Branches and Drop Boxes (how funny is this …….. the customer is actually paying back, when many customers are not paying back)
(4) Deutsche Bank has reduced the value of a Reward Point from Re.1 to 75 Paise
(5) ICICI Bank has started charging for Credit Card Payments through NEFT

So dear customers, the point I am trying to make is that BEWARE ……. All Credit Card issuers are trying to get more fee revenue and will try to extract those fees from you. Some do it openly and some do it slyly. So please check your Credit Card Statements carefully and if you see any hidden charges, please login a complaint with the bank and if they do not reverse it, with the Banking Ombudsman. Anyways do let me know … I would like to know the ways in which Credit Card issuers are trying to make their money.

You can write to me on Ask.Pranav@Gmail.Com and I will revert back to you as soon as possble.

Regards.

Pranav.

Which Credit Card can a businessman use for Working Capital Management?

Customer Says:

I am a business man and basically need money daily usually 10000-50000> on daily basis.So,I thought that a credit card might help me.Are these> really helpful.Pls tell me which card to apply for.

Ask Pranav says:

Credit Cards are to be used for convinience, so that you do not need to carry Cash everywhere you go. They are not to be used as Tools for Working capital management, as you are sure to get stuck in a Debt Trap. Please do not make this mistake.

However, if you need to get a Credit Card under any circumstances and you will be using it extensively, I suggest you avoid Barclaycard, ABN Amro and the other smaller companies. It would be better to go with ICICI or Citibank as they have a better product offereing and they have a robust Internet platform which will help you manage your account Online.

The Citibusiness Credit Card from Citibank would be a good option to go with.

Do write into ask.pranav@gmail.com for any further clarifications that you might have. Also do visit http://www.simplybank.blogspot.com/ for interesting articles in the financial services space, which may be of use to you.

Regards.
Pranav

Case Study (HSBC Bank) - Payment for HSBC Credit Card which was never received!

Customer Says:

Hi, I applied for HSBC credit card one year before and after some weeks I got call and letter from bank that they are not issuing any credit card and in case i got any credit card, dispatch it. No credit card and document i received.

After 6 month i got a call from HSBC recovery dept. to pay my due of 5000 otherwise they list my name in defaulter and blah blah. After that i called customer care who says my account is closed. After that i start ignoring them,but they continuously calling me .

Then they started bargaining with me to settle down.At the end i offered them, to pay 1000 rupees .Then they told me that their man will come at my place next day and pay him cash.As i heard from net that after that also they don't stop. Then i asked him to give me the letter of settlement i will pay that amount in the bank.And :D they refused. so the game continues...I would like to hear if there is any solution to get rid of it without paying any due to recovery dept and HSBC.

Ask Pranav Says

Yes, there is a way out. I am assuming that whatever you have stated is the truth.
If you have not even received a Credit Card from HSCB, there is no reason why you need to do any settlement with them. You just need to tell them to give you proof of delivery of the Credit Card and the Transactions that were done in your card, and wait for your response. There would mostly be some form of fraud on your Credit Card and you had never received it, there is no need to pay for the same.

You can collect all your communication with HSBC and share the same with the Head Customer Care at HSBC, the E-Mail will be updated on the website. If you do not get any response, then write to the Banking Ombudsman, the E-mail ID of which is updated on the HSBC Website, also keep a record of all the communication.

As you have not paid back the money (at least as far as their records are concerned) they would have reported your name to the Credit Bureau, once the case has been resolved you need to tell the HSBC guys to remove your name from the Credit Bureau, they can do it internally. Please do not leave them before they do this, else your changes of getting a loan subsequently may be affected.

If you have any further queries, do write into Ask.Pranav@gmail.com and I would be happy to answer any questions that you may have.

Also do check http://www.simplybank.blogspot.com/ for articles on financial education that may be useful to you.

Case Study (HDFC Bank) - Salary on Hold

Customer Says:

I have my salary account with HDFC bank, and i also had a credit card from them. In the last year i had become irregular in repaying the credit card dues due to severe illness of my mother. This month the Bank has frozen my salary account and withdrew all the money that I got as my salary without my authorization. I also offered them for a settlement option and repaying the whole amount in monthly installments. However, the collection dept of the bank did not agree to that. I want to know if these banks have got the right to do something like this. And if this is not authorized by RBI what are the actions I can take.

AskPranav Says:

In the Credit Card applications form Terms & Conditions there is a condition whichs says that the Credit Card Bank has a "Right to Lien" on the Salary Account you have with them, which also effectively means that if you do not pay your Credit Card dues, they can deduct the amount from your Salary Account without informing you of the same.

This is a standard practise in most banks where they issue credit cards basis Salary Accounts. I do not think that there is much you / anybody can do as the bank is covered on this.
You can read the Terms & Conditions of HDFC Bank for clarifications. I am sure that the "Right to Lien" clause is included.

For interesting information on Banking and Credit Cards do read the following blog.http://www.simplybank.blogspot.com/

Warm Regards.
Pranav

Case Study (Barclays Credit Card) - No Statements Sent but Charges Levied

Customer Says

I was holding Barclays credit card 4339481234567890 which was given on some promotion. I commited a mistake of using this card on 18-11-2007 for purchase of Rs 2174.00. I did not recieve any statement for this.Instead i recieved a call for payment. I was shocked but I was assured that any late payment charges shall be reveresed.Subsequently I sent payment of RS.2200 which was duly credited to my a/c on 28-12-2007.

But the bank kept on calling & sending statements inspite of card being suspended. Finally on 28-06-2008 AARTI came on line to inform that late payment charges can not be waived. I asked for supervisor & Mr Ranjit (Supervisor as told to me ) THAT HE CANNOT TAKE ANY REQUEST OR COMPLAINT ON A SUSPENDED CARD. I IMMEDIATELY ASKED HIM IF THEY CANNOT TAKE ANY COMPLAINT THEN HOW THE BANK CAN CHARGE INTREST OR OTHER CHARGES ON SUSPENDED CARD.i ASKED FOR MY COMPLAINT NO WHICH WAS 1897164 DT 28-06-2009.

Mr Ranjit told me to check status after few days. On 10-07-2009 Rashmi told me that this is not a complaint no but a REF>NO> ONLY. IT WAS SUCH A SHOCKING EXPERIENCE. Looking forward for early redressal.

Ask.Pranav Says:

This is a standard complaint received from most users of Barclaycards. The Statement Process is poor and the charge reversal policy is also not implemented properly. You need to do the following.

(1) Write to the E-Mail ID provided on the website which is service@brclays.com
(2) If you do not get a response write to the Nodal Officer which is Mrs.Meera Rawat and her Contact ID is provided on the website
(3) If she does not respond, write to the Banking Ombudsman for help \

It is very important that you remember the dates on which you spoke to the bank and all the written communication and have copies of the same. It is important that you submit the same to the Ombudsman when you do not receive a satisfactory response from the Bank for 45 days.

I suggest you do not waste any time reasoning out with the Barclaycard Contact Centre folks. It is an absolute waste of time. Just patiently make your point, record your call and hang-up
Also do visit the following website on http://www.simplybank.blogspot.com There are several articles on Credit Cards posted here which may be of use to you

Case Study (SBI Credit Cards) - Rs.500 Late Patyment Fees on Outstanding Less than 50 Paise

Customer Says: SBI Credit Card

HARRASSMENT BY APPLYING UNJUSTIFIED CHARGES: I was using the SBI GOLD card no. 431751234567890 from 2006 to JULY-2007. In one of the payment i made payment of the amount excluding the fractional amount, e.g. Billed Amount was 884.23Rs. & made payment of only 884Rs. to make it round figure. But in the next months statement the bank charged me late fees for the remaining 23 paisa.

When I requested their customer care executive for reversal of the same he refused to do so. I stopped making payment of that late fee, and repeatedly requested customer care to consider it, but all in vain. The same is going on and the latest amount due against the card in the month of June -09 is of 2476.90 Rs. Now I am fed up of talking with customer care department, as they are not at all ready to understand my issue. Sir, I want to bring it to your notice that if really I wanted to cheat the bank, I would have used the card further also as the credit limit over my card was of Rs 52,000, but I never did that. You can even verify my track record before this incidence. I hereby request you to please look into this matter kindly and give me the reversal of the amount whatever you charged me. Otherwise it will be a big injustice with me.

Ask.Pranav Says:

Hi, I faced a similar problem with my Barclaycard. The issue is that most Credi Cad issuers allow a short Payment of Rs.100 on the Total Amount Due. If you pay Rs.100 less than your Total Amount Due, you will still not be charged any Interest.

However Banks likeSBI Card and Barclays do not follow this practise. Hence all customers have to be very careful and ensure that the full amount de is paid to the nearest Paisa. I suggest you do the following.

(1) Register a Case with the Banking Ombudsman stating that you had not paid a few paise and the Late Payment Fee Charged has been Rs.500+ for a short Payment of 23 paisa.Word the letter saying that the Late payment Fee cannot be 1000% of the Payment Outstanding
(2) My bigger worry for you is that by now, they would have reported your name to the Credit Beureau completely ruining your Credit Card. Fo more details on what this means you can visit the following article which explains what a Credit Beureau is.
http://simplybank.blogspot.com/2009/04/what-is-cibil-credit-bureau-and-why-is.html

I suggest you pay off the amount and close the matter as it is very important to have a good Credit Record these days. For any further clarifications you can write to me at Ask.Pranav@Gmail.com or visit my Blogsite on http://www.simplybank.blogspot.com I am sure you will find some articles of use out here.

Case Study (Kotak Credit Cards) - Cheque Encashed but Payment not Received

Customer Says:

I have issued a cheque # 123456 (SBI, HPS Branch) for Rs 297.90 as payment towards my credit card dt 06/10/2009 & dropped it in Kotak ATM located at Begumpet, Hyderabad on 06/10/2009. However, I received a call from Kotak Cards call centre that the payment is outstanding. The debit of the referred cheque from my SBI account updated. I request you to kindly sort out the issue at the earliest

Ask.Pranav Says:

This is a very simple issue for resolution. You need to proceed as follows.

(1) Call the Kotak Contact Centre and fax them a copy of your Bank Statement which clear reflects the Charge Debit and Chequ Number. Also check that you had written the Card Number correctly
(2) They will have to reverse out all charges (Late payment as well as Interest)
(3) If they refuse write to Nodal Officer and then to Banking Ombudsman and keep all the documentation.

If what you are saying is correct, you have a very strong case and you cannot lose. Do let me know if you need any further clarifications. Feel free to write to me at Ask.Pranav@Gmail.Com
You can find very useful information on Credit Cards on the following Blogsite. Do go through and let me know your comments.

http://www.simplybank.blogspot.com/

Introducing Customer Case Studies

The objective of this blog was to empower and educate customers on the issues that they experience on their Credit Cards. However basis the mails I receive from readers, I have found out that I need to start helping customers resolve the specific problems that they face with their Banks.

As a result, I am starting a Case Study series where I will publish sample customer complaints that I receive and the resolution as proposed by me, hoping that readers can read these case studies and take up the issues with the banks.

So do continue to write to me with the specific issues you face (and how you feel your bank is cheating you :) ) and if the complaint is representative, I will publish the same with the resolution so that other customers can benefit from it as well.

Having worked closely with 2 Credit Card Issuers in the last 4 years especially from a Customer Service perspective, I think this is an area where the customers need help

Feel free to write in to Ask.Pranav@Gmail.Com with comments / issues if any

RBI Roll-Backs FREE ATM Withdrawal Transactions

In April, RBI had launched a mandate to enable FREE ATM Transactions to all customers across all ATMs. This was a very customer centric move wherein all customers (irrespective of bank) could do a cash withdrawal from any ATM free of cost.

As per the new policy to be made effective starting 15th October, this will be available to Savings Account customers for the first five transactions in a calendar month and for Current Account customers there will be no FREE Transactions at all. However the Banks may continue to offer additional FREE transactions basis the Average Balances maintained – so you will need to check with your bank for how many transactions you have FREE.

How do you know if it impacts you?

(1) If you do not do more than 5 ATM withdrawal transactions from other Bank ATMs in a calendar month then your life does not change
(2) If you do more than 5 ATM Transactions, then you need to call and check with your bank how many transactions you have FREE basis the balances you maintain
(3) Current Accounts Customers will also need to contact the bank and check how many transactions they have FREE
(4) Now at other Bank ATMs you can do a transaction of at max Rs.10000 as a per transaction limit

It is disappointing that RBI has withdrawn this mandate, however in my opinion 95% of the retail customers will not be impacted as I do not think they do more than 5 transactions from other bank ATMs, however RBI should focus on making this policy easy to understand and this rollback is going to complicate understanding from a customer point of view.

For other useful Personal Banking tips do go to www.simplybank.blogspot.com or you can mail me at Ask.Pranav@Gmail.Com and I will try to respond to your queries at the earliest.

Product Review: Yatra Barclaycard Platinum Credit Card

This Credit Card is a Travel Card, however it is not a co-brand with an airline, however it is a co-brand with a travel aggregator which is www.yatra.com. The plus point is the fact that the customer does not get tied down to a particular airline and can redeem points across airlines and holiday packages.

The strengths of this Credit Card are as follows

(1) It is a FREE Visa Platinum Credit Card (not many Platinum cards are free in the market) and hence the customer becomes eligible for VISA platinum Offers which are decent from time to time such as PVR Movie tickets etc. Check www.visa.com for the latest offers
(2) It is not tied to any airline and unlike the other travel cards such as Jet Airways Citibank Credit Card are not linked to 1 Airline only. This gives a lot of redemption options to the customer

For the 2 strengths listed above, this Card has several drawbacks

(1) The redemption ratio is the worst in the Industry. The last time I calculated 1 Yatra Mile was 0.25 paise and you get only 1 Yatra Mile for all spends other than those done on www.yatra.com
(2) You will have to spend at least 3 times what you spend on Normal Cards to get free flights. You are better of spending on any of the regular credit cards and using the regular Reward Program to convert them to JP Miles or King Club Miles
(3) Poor Quality Customer Service both at the Contact Centre where complaint resolution and turn around times are not managed well
(4) Barclaycard has got several serious customer complaints on www.mouthshut.com and other such forums
(5) No Internet Banking Platform, so you will need to call the Barclaycard Customer Service Helpline for any details you require (which is not a very pleasant experience)

On the whole this Credit Card is nor recommended for customers as the pitfalls far outweigh the strengths. Please think several times before you apply for this card because it is very unlikely you will get any value for it. Barclaycard has the Timescard offering which is awesome, so you could try considering that.

For other useful Personal Banking tips do go to www.simplybank.blogspot.com or you can mail me at Ask.Pranav@Gmail.Com and I will try to respond to your queries at the earliest.

Consumer Offer Review: Deutsche Bank Festive Promo 2009 (SpendVantage)

Deutsche Bank has launched its Credit Card festival Promotion for the year end. The offer period is 15th September to 15th November, 2009.

The offer is open to Deutsche Bank Platinum, Mile & More and Deutsche Bank Signature Credit Card holders. The Vanilla Deutsche Bank Card Holders are not eligible for this promotion.

The construct of this offer is as follows.

• Customer needs to spend a minimum of Rs.25000 in a minimum of 5 purchases between 15th September and 15th November, 2009
• If the above condition is satisfied, the customer qualifies for a quiz to be conducted in the last week of November
• The first 1000 correct responses get Rs.4999 Cash Back

This is a VERY GOOD offer from a customer stand point due to the following reasons

• This is a 20% Cash Back on the total spend amount
• Customer needs to satisfy the spend criteria and then be alert on 20th November for the quiz
• The quiz questions will be simple and can be googled out instantly
• The main focus should be to respond to the quiz on 20th November itself and then walk home with the 20% Cash Back

This offer is much better than the maximum 10% Cash Back that Deutsche Bank launched in the Festival promotion in 2008

If you want to apply for a Deutsche Bank Credit Card you can www.deutschebank.co.in and fill up the application form. This Bank has very good customer Service and it is a pleasure banking with them.

Myths of Online RTGS and NEFT Transfers

Common Myths about RTGS and NEFT Transfers

One of the cool things RBI has done in the last few years is introducing Online Funds Transfers which are of 2 types.

(1) RTGS: Real Time Gross Settlement which require a minimum transaction amount of Rs. 100,000 (transfer happens within 2 hours usually into the destination account)
(2) NEFT: National Electronic Funds Transfers which can be of any amount (transfers happen in 3 cycles of 10 AM, 2:00 PM and 4:00 PM or some similar time)

I am not dwelling too much on the technicalities of the process. What I want to highlight is the convenience of this process and the security aspects related to the same. The objective is to get more and more people (especially the younger crowd who are always short of time) to use this for funds transfers instead of cutting out cheques.

Security Aspects

(1) You will need to register for Internet Banking to effect RTGS and NEFT Transfers online
(2) Your Bank should have a Payee List (to whom you can make RTGS and NEFT payments) with a separate Payee Registration process.
(3) I have a Citibank Account whenever, I need to transfer Funds to a friend, I need to register him / her as a Payee and enter his Account Details. An SMS gets triggered to my Mobile which I enter on the Internet and confirm him as a Payee. It is only now, after payee confirmation that I can start transferring funds to him
(4) If your Bank does not have a Payee Registration Process with an SMS leg to it, then please do not use the Internet Banking of this bank, else if somebody hacks into it, they will be able to empty your account – and I am sure you do not want that happening
(5) Also ensure that you have an Instant SMS alert facility that whenever your Account is debited for RTGS/ NEFT or for any transaction s above a threshold, you should get an alert on the Mobile
(6) The bank should have daily limits for RTGS and NEFT Transfers

If the above criteria are met in the Internet Banking of your Bank, you can go ahead and execute Online Funds Transfers from your Bank Account

Payee Registration Process

There is one obstacle you will face in the Payee Registration process which is the entry of the IFSC Code of the destination Account. It is important to note that RBI has assigned an IFSC Code to every Bank Branch. This IFSC Code can be found in 2 ways

(1) One the Cheque Leaf: You will have to ask your friend the IFSC Code of his Bank Account which he can read on his cheque book / cheque leaf
(2) Bank and Branch Combination: Your Internet Banking may ask you to enter the Bank Name and Branch and Auto Select the IFSC Code. In this case you will have to ask your friend to specify his Branch

Common Problems faced with RTGS and NEFT Transfers

(1) Funds Transferred but not credited to the destination Account: You have no reason to worry. If the funds get returned to your account means that the data (Payee Name, Bank Name, Account Number, IFSC Code) you entered was incorrect.
(2) If the funds do not come back to your account and your friend has also not received them, all you need to do is call your bank. They will tell you if the funds are with them or have been transferred to the destination Bank
(3) If transferred to the destination bank then you can take the RBI Reference Code and pass it on to your friends. He can confirm the same to his bank and get the amount transferred to his account
(4) If the money is still with your bank, you can ask them to transfer it back to your account.
(5) These are small technical issues in the process and I will not dwell into the reasons for the same

Other than the Common problems and the security issues sighted above, this process works with 99.5% accuracy and can save you multiple trips to your Bank / ATMs to drop off cheques.

For any further clarification on Customer Related Banking Processes you can write to me at Ask.Pranav@Gmail.Com and I will revert to you as soon as possible

Dynamic PIN Pads for Internet Logins

With the advent of hacking softwares and professional hackers in India, it has become extremely important for Banks to combat Financial Fraud and more importantly Internet Banking Fraud. When Internet Banking was first launched sometime in 2000, the customer would have to enter the Internet Banking User ID and Password on his keyboard which continued for about 5 years till 2005.

Today we have hacking softwares to capture keyboard entries, so if you are entering your User ID and Password on your computer, some hacker can easily capture the letters you are entering with the help of hacking software. As a result, he knows your User ID and password and can hack into your account. When I speak to customers about this risk, they just dismiss it saying that the chances are one in a million, but you never realise the import of it until the same happens to you.

To counter this risk, banks have launched Dynamic PIN Pads where the customer does not enter his Internet Password on the keyboard but on a dynamic Keyboard with a mouse. The layout of this dynamic keyboard changes with every login, so the hacking software cannot understand the letters / numerals you are selecting and your Internet User ID and Password is protected.

I would strongly recommend that all customers who use internet banking, need to ensure that they enter their password on the Dynamic PIN Pad only and not on the keyboard. If your Bank does not offer it, then write to them and ask them to. If you are keeping significant money in your account, I am sure they will listen.

However, it is important to note that when you use the Dynamic PIN Pad the password will become easily visible to people standing behind you who are looking into your computer (a phenomena known as “shoulder surfing”) so make sure you login when you are alone, else someone could be looking at your screen and noting down your password.

If you have any further questions pertaining to Online Security do write into Ask.Pranav@Gmail.Com I will revert to your query as soon as possible.