Imagine! On a dewy summer morning, as you return from your morning walk, you are greeted by your bank statement. The steep charges for your debit card, which you were not aware of, have you in a state of shock. You go to the bank to confront its staff, where you bump into your friend, who tells you that he has just booked a fixed deposit at 9 per cent. Your misery compounds-only yesterday did you book one at 7 percent, with the pushy banker giving no indication of this alternative. Even as you are recovering from the twin shock, your wife calls to tell you that she has been evicted from her flight as the airline said it could not 'accommodate' her. So she had to shell out a good three grand to buy another air-ticket.
Enough, you think! On your way back, you think you could do with some good news. You call up your real estate agent to inquire if you will get the possession of your flat on the promised date, but he comes up with a lame excuse.
Does all this sound like a series of horrible coincidences? Well, it definitely is one. Although the law of probability ensures that no individual shall suffer so much mental trauma in the span of a day, at some point in our lives, most of us are at the receiving end of each of them. The single thread that runs through these forgettable experiences is that all of them either cause damage to your finances, or make you miss out on the advantages that were there for the taking. And, each time, someone's has got the better of you. The world outside is a minefield of deception and double-dealing.
No sooner do you throw caution to the wind than you turn vulnerable to dirty tricks-unethical practices of sellers where they push a financial product or service at your expense, often to save their own skin. Even in sectors as strongly regulated as mutual funds and banking, such practices are rampant. And they are even more common in sectors like real estate, which do not have a watchdog. On the following pages, we blow the lid off 17 such dirty tricks, discuss how they can wreak havoc on your finances and, more importantly, tell you how you can outsmart the sales personnel when he tries to take you for a ride again.
1. Banking: High debit card charges
Blame it on their stiff sales targets, but it's very unlikely to come across sales personnel who will reveal the annual charges on a debit card at the time of account opening without you asking for it. Ditto for a debit card upgrade.
The damage. A high-end debit card has a slew of features, but it comes at a high cost, typically Rs 500-1,000 per year against Rs100 for a basic card. Often, you end up paying for services that you do neither require nor use.
The pre-emptive strike. While opening a savings bank account, fill out the application form yourself and read the details, including the fine print, carefully. Inquire about the annual charges on the debit card and cross-check it with what's mentioned on the bank's website. In case of upgrades, check the charges of the card concerned on the bank's website and confirm that with the bank.
2. Fixed deposits Fixated on attracting capital
In the hunt for deposits, banks often advertise their best fixed deposit (FD) rates. Few know that those attractive rates are seldom for popular periods, such as six months or a year. For example, a major private bank gives an interest rate of 9.25 per cent on an FD booked for 1 year 16 days. However, for periods between 1 year 17 days and two years, the rate comes down to 8.50 per cent. Need we say more?
The damage. The unsuspecting customer will book an FD for periods such as six months or a year. By being unaware of this disparity in rates, he will miss out on the high returns that the bank offers, albeit as a trap.
The pre-emptive strike. Don't book an FD without a long and hard look at the interest rate chart. That will fetch you the best possible interest rate for a tenure around your requirement zone. Before booking an FD, check the rates, across tenures, on the bank's website.
- While opening a savings bank account, fill out the application form yourself and read the details, including the fine print, carefully
- Don't book a bank fixed deposit without a long and hard look at the interest rate chart that banks display
3. Too many loan applications...
Direct sales agents (DSAs) are an endangered species, but they sure know how to flourish on your hard-earned money. When you apply for a loan through a DSA, he would, seemingly in earnest, encourage you to apply to many lenders, citing greater probability of getting a loan. And, innocent as you are, you give him several cheques as processing fee for each application. His cut: commission from the bank's processing fee.
The damage. Besides paying processing fee to multiple lenders, you also end up doing near-irreversible damage to your credit history-applying for multiple lines of credit across lenders reflects a huge appetite for borrowed money.
The pre-emptive strike. Apply for a loan only when you satisfy all the eligibility criteria, and file an application with just one lender. If your application is rejected, find out the reasons. If there are things affecting your loan eligibility, rectify them first before you approach another lender.
- Apply for a loan only when you satisfy all the eligibility criteria, and file an application with just one lender
- Fix a reasonable credit limit on your add-on card and insist on SMS alerts for spends made through your primary as well as add-on card
4. Add-on cards: More ain't merrier
When you apply for a credit card, the bank's sales personnel are the sweetest guys on the planet. In fact, very often, they will even volunteer to fill out the form for you. What they sometimes do stealthily, however, is mark the box under the add-on card category. As a result, you receive an add-on card along with your credit card even though you never wanted one.
The damage. If you are not careful with spends on your add-on cards, it's likely that you will be on a sticky wicket while clearing off the credit card bill before the due date. Besides, even if your spends (on primary and add-on cards) exceed your credit limit by a whisker, you will have to pay over-limit charges, which could be very high.
The pre-emptive strike. It's best to fill out the credit card application yourself. But should you succumb to the lure of the sales personnel filling it out for you, be there in person when he is doing so. On the application form, strike off things you don't require. And if you really require an add-on card for a family member, ensure that its holder is briefed about proper credit card usage. Importantly, fix a reasonable credit limit on your add-on card and insist on alerts through SMS/email for spends made through your primary as well as add-on card.
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