Buyer beware Salary and Savings Accounts

“If you are given financial freedom you also have certain responsibility towards the product and the fine print that comes along with it,” says Pushpendra Mehta, country principal, VCherish Consultancy. But, is it all about being responsible? Let’s explore.

Salary Accounts.

It came as a rude shock to Vinayaka Krishnamurthy, an IT professional from Pune, when he was charged a penalty of Rs1,500 for not maintaining the minimum balance (mandatory for normal savings bank accounts) in the salary account of his previous company with Axis Bank. There are many like Krishnamurthy, who don't pay heed to the terms and conditions, which says: “In case, the monthly salary is not credited into the account for more than three consecutive months, the special features offered under salary account stand withdrawn and the account shall be treated as a normal savings account.”

To guard against such surprises, first check if your salary can be credited to your old salary account when you join a new organisation or get a salary cheque, which you can deposit in your old salary account. Else, you may consider closing the account or maintain the required balance.

Savings account.

The 6 per cent or 7 per cent interest offered by banks on your savings bank account is a very attractive proposition, but did you know that the higher rates are applicable to an amount which is over and above a specified sum?

Anything, less than the prescribed amount in your savings account attracts only 4 per cent rate of interest.

Therefore, it makes sense to move to another bank for the higher rate only if you can maintain the required sum.

Dis-Credited. If you are a MasterCard holder, you are liable for losing your card if you have a good credit history, haven’t used it for unauthorised purchases, not reported two or more unauthorised transactions in the past 12 months and safeguarded your card. You must also report the loss of card immediately. Else, you have to pay for your deeds.

So, be prudent and maintain a good credit history and use your card with care. You must also register your card for second level of authentication for online shopping and opt for card protection plans for multiple cards.

Myth about credit limits. Technically you should not be able to spend more than the pre-approved credit limit on your card, but banks do not stop you from doing so. Instead, once you do so, they penalise you with over limit charges of one per cent of the over limit amount. The rule is clearly mentioned in the Most Important Terms and Conditions (MITC).

You must know your credit limit and keep track of your spends for every billing cycle. If you do need to spend more in case of an emergency clear the amount as soon as possible, before the billing cycle ends.

Note: You should not be under the impression that only your credit habit can land you in trouble, the same is true for the hard-earned money you invest whether it be in fixed deposits (FD), insurance or real estate, among others.