Rupakumar Pradhan, CFPCM, CWM®

Personal Financial Advisor

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Hidden Charges In Your Saving Bank Account

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Hidden Charges In Your Saving Bank Account

Hidden Charges In Your Saving Bank Account
November 30
19:10 2019

Savings accounts are designed to encourage more savings, unlike current accounts which allow unlimited transactions and do not offer any interest. An individual who has a steady income for example salaried employees can benefit from savings accounts. Also, people who have set short term goals like a holiday, or wedding or vehicle purchase etc. can also benefit from savings accounts.

Almost every bank offers the facility of savings and current accounts.

Banks allow a limited number of transactions per month to a savings account holder. Usually the first five transactions are free. The interest rate charged on a savings account ranges from 3.5-6%. Because of the limited number of transactions, the account holder can save greater amount over a period of time

One should know how the banks are charging on your savings account for different transactions or activities.

1.  Non Maintenance of Monthly/Quarterly Average Balance:

Regular savings accounts require customers to maintain a minimum average balance (MAB). Generally, banks charge a penalty on non-maintenance of MAB in your saving accounts. The MAB amount and the penalty differ across banks, and also depends on the type of bank account you have.

State Bank of India: Customers having a regular savings bank account in SBI branches located in metro and urban areas are required to maintain a minimum average balance of Rs 3,000, in semi-urban branches Rs 2,000, and in rural branches Rs 1,000, according to the bank’s website.

Almost all banks insist on maintaining monthly/quarterly average balance. In case you fail to do so, banks can charge anywhere from Rs 200 to 500 per instance.

2. Bank Branch Visits:

Major Indian banks — SBI, ICICI, HDFC and Axis — have decided to charge users for cash transactions above certain limits and for a few facilities which were free till now. More banks are expected to follow suit. The new charges are aimed at discouraging cash transactions though banks might end up profiting from them hugely.

Most banks discourage customers to visit their branches as branch transaction is much more expensive for banks as compared to ATM or internet banking. So banks charge anywhere between Rs 50 to 200 for transactions in branch. This charge may vary based on transaction (cash vs non-cash) and the type of savings account you have.

Suggestion: If you are tech savvy and use internet banking coupled with calculated use of ATMs you can avoid visiting bank branches. In case you visit them know the limit after which the banks start charging your visit.

3. Money Transfer charges:

Many of us have moved to electronic payments, however, not all of us are aware of the costs that are attached with them.

Transferring money online has brought lot of convince and is widely used. But even this is not free. If you use RTGS or NEFT to transfer funds from one bank to other, banks charge between Rs 5 to Rs 25 for each transaction.

Suggestion: You can use mix of cheque and internet banking to transfer money.

 4. Debit Cards / Credit Cards Annual Fee:

On a debit card, there are usually two types of charges. One is the annual fees that a bank charges for issuing the card to the customer. Two, is the convenience fees that is charged at the merchant outlets for swiping the card at a point-of-sale terminal.

A customer is entitled to eight free monthly transactions at an ATM (five at his home bank ATMs and three at non- home bank ATMs) in a metro city. Thereafter for every transaction, a bank charges Rs 20 per financial transaction and Rs 8.5 for non-financial transactions.

The annual fee for debit card varies from Rs 100 to 700 depending on the card. Banks also charge in case you request add on cards for family members.

Credit cards come with higher fees and more limits compared to a debit card. Credit cards come with annual fees, renewal fees and convenience fees. Apart from that, if a person misses the due date to make a payment, then interest is payable on the outstanding balance at a rate which varies from bank to bank.

Cash withdrawals from ATMs using credit card is expensive.

Suggestion: Some banks offer facility to link multiple accounts through one card. You can use this facility in case you have multiple accounts in the same bank. Also in case of joint account, take card for all holders if necessary.

5. ATM Usage:

Normally, banks allow up to five free transactions per month at their own ATMs, and three free transactions at other banks’ ATMs.

It is to be kept in mind that transactions include both financial and non-financial transactions at ATMs

With the new RBI notification banks are allowed to charge customers for more than 5 usages of ATMs in a month. The charges can vary from Rs 8 to 20 depending on the type of transaction.

6. Email/SMS alerts:

Almost all banks have begun to charge for SMS alerts on transactions. Request beyond fixed annual, quarterly or monthly account statements entails charge. This may vary from Rs 50 to 200.

Suggestion: Avoid taking unnecessary statements and use net banking to keep track of bank account. Also if you need to submit bank statement for anything, take the statement printout with you and get it signed from the bank. In this case most banks do not charge.

7. Cheque Bounce:

If a cheque bounces due to insufficient funds or any other technical reason, such as signature mismatch, both the defaulter and the payee are charged by their respective banks.

Banks charge whenever the cheque bounces. In most cases the charge is levied on both – one who had issued the cheque and the person who had submitted the cheque. This may vary from Rs 100 to Rs 500 per instance.

8. Stop Payment Request:

A request to stop payment of cheque for an amount mentioned in a cheque that is not yet cleared by the concerned financial institution is done from accountholder’s side.

In case you instruct the bank not to pay an already issued cheque, banks may charge Rs 50 to Rs 100 for this. HDFC bank charges Rs 50 for stopping single cheque and Rs 100 for series of cheques.

Suggestion: Many banks do not charge if you use Phone banking and Net Banking for stop payment requests.

9. Additional Cheque Book Request:

Generally a fixed number of cheque books are free every quarter, anything above that is chargeable. For instance ICICI bank gives 30 cheque books free every quarter. Thereafter every book costs Rs 30.

SBI will issue only 10 cheque leaves free in a financial year for savings bank account holders. Thereafter, additional 10 leaf cheque books will be issued at Rs 40 plus GST. For 25 leaf cheque books, the bank will charge you Rs 75 plus GST.

10.  Standing Instructions:

You can register standing instructions on your savings and current accounts. You can register multiple standing instructions on different accounts and at different frequencies.

Standing instruction is a good thing for paying regular monthly bills. But some banks charge one time fee for setting up standing instruction and recurring fee for processing it every time. SBI charges onetime fee of Rs 50 for standing instruction setup. A failed standing instruction can set you back by Rs 225.

11.   Debit/ATM Card Replacement Fee:

While debit cards come free for the first time but, banks charge a sum of money for services like reissuing the debit cards to annual maintenance charges. These are the charges you must bear for replacement of your debit card.

Most banks charge a fee to replace your lost or broken ATM cum Debit card. This fee varies from Rs 100 to 500.

12.  Reset Password/PIN number:

You forgot your ATM card PIN number of Net banking Password, be ready to shell out some fee to the bank to reset these. For instance HDFC bank charges Rs 50 plus taxes for PIN reset.

13.  Debit Card decline due to insufficient funds:

There are many instances when you forget the balance in your account and try to withdraw more than the funds in the account from your nearest ATM. When you try to withdraw from ATM and if a message pops up that funds are insufficient, make sure that you do not try again else you will be penalized multiple times.

If you swiped your debit card but there was insufficient fund in the account, banks would charge you for that. For e.g. ICICI bank charges Rs 28.09 per swipe for decline due to insufficient funds.

14.  Redeem Reward Points:

Most banks offer reward points for using their Net banking or Debit cards. This is a way to keep customers engaged and keep them spending through their cards. But when you try to redeem those earned reward points you may be charged even for that. ICICI bank rewards are associated with Payback and they charge Rs 99 plus tax on any catalogue based redemption and Rs 25 plus tax for any online or in-store redemption made by the customer.

15.  Attest Photo, Signature or Address:

Many a time customers require banks to attest their photos, signature or address. SBI charges Rs 150 for signature verification.

16.  Balance Certificate:

Banks may charge from Rs 100 to 500 to issue balance certificate.

17.  Interest Certificate:

A home loan certificate is nothing but a statement of your home loan account provided by your lender. It is the summary of the interest and the principal amount repaid by you towards your Home Loan for the given financial year and serves as a proof of home loan repayment.

Generally the first copy is free but for each additional copy you may be charged anywhere between Rs 50 to 250.

18.  Closing Bank Account:

Many banks charge you “Account closure fee” in case you close your account too soon. For e.g. ICICI bank charges Rs 500 for closing accounts if it’s within 1 month to 1 year of account opening.

19.  Transfer of accounts:

Want to transfer your account from one branch to other, SBI charges Rs 100 per instance.

20. International Usage of Debit Card:

In case you use debit card to withdraw money at foreign location, be ready to shell out fee amount at ATM. For e.g. HDFC bank charges Rs. 15 per balance enquiry & Rs. 110 per cash withdrawal (plus taxes). Also there is a mark-up of 3.5% on foreign currency transactions carried out on Debit Cards.

21.  Returned Courier due to wrong address:

SBI charges Rs 100 if you ATM card/ KIT returned by courier due to wrong address.

22.  Tax implications

The interest that you receive from a savings account is taxable under the head “Income from other sources”. Further, Section 80TTA provides for a deduction upto Rs 10,000 on such interest income and therefore, interest earned beyond Rs 10,000 only is taxable.

As you can see there a lot of charges associated with savings bank account.  You must keep yourself aware with any new charges. Also it’s very important to make a list of all savings accounts and close all those which are not required.

Saving Money Is Making Money!

“Beware of little expenses. A small leak will sink a great ship.” ~Benjamin Franklin

 

I am a CERTIFIED FINANCIAL PLANNERCM, CHARTERED WEALTH MANAGER®. For the moment, I have shared my experience growing up with you because it had a tremendous impact on how I do what I do.

If you have a question about your own financial situation please connect with me.  I’d be delighted to try to be of service.

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About Author

Rupakumar

Rupakumar

Mr. Pradhan has over 22 years of experience in financial services industry. He was previously working with leading Life Insurance Companies, Broking Firms, Distribution Company, Financial Planning Company and Health Insurance Company. He has cleared several NCFM modules & is also AMFI Certified. His expertise is in Comprehensive Financial Planning, Technical Analysis, Portfolio Management, Investment Advisory, Wealth Management & Business Development.

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