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Personal Finance and pilferage

It is a well known fact that most of us don't manage our personal finance as sincerely as we are expected to do. We become lethargic and leave many a loose ends to be tied in respect of personal finance matters. I got a taste of badly managed Credit Card payments last month when I got hit with a Rs900/- charges on account of delayed payments. This is the second time in the last 3 months after having already paid out close to Rs750/- on an another credit card. I felt terribly miserable because these are hard earned money which is being squandered away. The guilt of letting these things happen lingered on for few days. So I sat down and tried to list down avenues where people lose money on account of charges, fees etc., or where there is personal financial pilferage. (I need to link the article to the heading, hehe!!)

1. Missing credit card due dates: One of the most common reasons among the personal financial pilferage is paying late payment fees and finance charges (interest). Many a times it happens that you have money in your SB account with the same bank but you just failed to drop the cheque or make the online payment on time. The charges are flat ranging from Rs250/- for late payment to finance charges (interest) of more than 36% p.a on the outstanding balance. It is very painful!

2. Failure to maintain minimum average balance: We have multiple bank accounts and at times, we fail to maintain the required minimum balance. We move jobs and with every job, you get a bank account "free". But we never bother about the bank accounts from our previous jobs!! Banks, these days, mercilessly charge a hefty fine for not maintaining minimum average balance. For example, a new-generation private sector bank, charged more than Rs850/- for not maintaining enough balance in the SB account to one of the persons I know.

3. Debit card fees: Nowadays almost all the banks have started charging annual fee of more than Rs100/- towards debit card charges. Almost as a default option, we are provided with a debit card, even if you dont want it. From my personal experience, I use the debit card of only 2 banks but I have debit cards from 5 of my different SB accounts. Here, there is a pilferage of money on account of debit cards which are seldom used. Added to that, is the requirement to safe-keep these cards and not to mention about the confusing password requirements.

4. Multiple demat accounts and charges associated with that: Many start investing in equities or should I say trading in equities these days. When they lose money trading stocks, the most common thing is to open a new account to try their luck rather than stopping the activity of trading in stocks. In these scenarios, you end up with multiple demat accounts. The downside of multiple demat accounts is the various charges which gets attracted to the demat accounts, like, the annual maintenance charges, monthly depository participant charges even if there is no activity in your demat account. In addition, few subscribe to the SMS alerts and recommendations from the brokers, which results in a monthly charge as well.

5. Annual credit card fees: Nowadays, most of the credit cards are free of annual charges. But still we at times find ourselves paying the annual charges to the card issuing company in respect of some old cards. This is definitely an avoidable expenditure particularly in current scenario. But the point you should note is that if you are currently holding a card which charges annual fees, please ensure that it is properly surrendered. Otherwise, the card issuer would charge you the fees which remains unpaid and you end up being negatively impacted on the credit score.

6. Maintaining excessive balance in SB accounts: It is just the opposite of not maintaining enough balance on your SB accounts. Many people maintain excess or excessive liquidity in their SB accounts. This excessive liquidity maintenance in SB acocunts directly results in lost opportunity and financial pilferage. I have found this phenomenon more among the middle-aged people, who feel very insecure if they dont have a sizeable bank account balance for no apparent reason. Your SB account earns just 3.5% p.a whereas liquid funds and short term funds earns more than 7.5% these days.

The most often repeated reason for poor handling of the personal finance is the lack of a tracking mechanism, I never got the bill for my credit card or there was no heads up given. There are number of avenues which are available for tracking your personal finance starting with an excel sheet. I can also write of other options for tracking the personal finance online, which will come as a separate post in the coming days.

Till then, be cautious on your personal finance and you are losing money as you read this even without you realising it!!

PS: I managed to get the late payment and finance charges of Rs900/- waived with my card issuing company. If you ask for waiver, many a times, you get it. But my luck didn't work with the earlier one of Rs750/- where I worked for few years!!


Pradeep said...

Maintaining excessive balance in SB accounts: i often envy guys who maintain a/c balance in 10s of thousands while standing in queue in ATMs.....many do it...
one thing that most of credit card holders do is, spend a lot, end up paying only the minimum balance and go on for years...they are losing big time!

Venkysdiary said...

@Pradeep: Yeah, not many people could afford huge balance in SB accounts but I tell you there are number of people who can still afford that.

Yes, credit card balance roll-overs are the big issue because people dont realise that the interest charged on this is very very high.