New-Delhi based Bhupinder Singh, 52, pays instalment for a loan on the 5th of every month. The money is automatically deducted from his account. But a few months ago, the transaction failed. The reason was insufficient funds in the account. This came as a shock to Singh as he had deposited the required amount in the account. When he went to the bank, he was told that the annual debit card fee was deducted from his account on the 4th of that month, leaving the account short by Rs 200. "I was not aware about the debit card charge. Now my credit score has been affected. I also had to pay for the failed transaction."
Banks charge you for a number of things. For example, you pay extra if your debit/credit card is swiped abroad. Similarly, there are charges for duplicate bank statement, PIN generation, demand draft and even account balance updates that you get via SMS on your phone.
Rahul Soota, executive director, mymoneymantra, a financial product distribution company, says, "Customers have a notion that they are giving business to the bank and so the bank should thank them for it. But the reality is different. Banks charge for services to recover costs."
Some of these charges lead to disagreement between banks and their customers. For instance, there is big confusion over the penalty levied when the average balance in the account falls below the minimum mandated for the account.
Japjit Bedi, head, deposits and wealth management, private and business clients, Deutsche Bank India, says, "Recently, many banks moved from quarterly to monthly system (for calculating the minimum balance) and tweaked charges for non-compliance. One must find out whether one has to maintain the mandated minimum balance on a monthly or a quarterly basis."
Harsh Roongta, chief executive officer, apnapaisa.com, says, "Banks should send regular updates/SMS alerts to customers about the various charges. Printed material may also be given to them at the branch."
Here are some common bank charges that we all should know about.
AVERAGE BALANCE REQUIREMENT
Earlier, all banks used to take the quarterly figure. Now, many have moved to the monthly system. There are also accounts with no minimum balance requirement. Check out with your bank how much balance you need to maintain.
If the figure falls below the level mandated for the account, banks usually charge a penalty.
For example, in a State Bank of India, or SBI, account, you have to maintain the minimum balance on a quarterly basis. ICICI Bank and HDFC Bank do the calculation monthly. Moreover, while SBI charges you per quarter, the other two imopose a fine for every month that the minimum balance is not maintained.
Many customers are not aware about how the average balance is calculated. Roongta says banks should tell customers about this calculation when they open the account (see How to Calculate Average Balance).
Banks charge you every time you apply for a duplicate account statement. The good news is that you pay less if you apply through net banking, phone banking or ATM. The usual fee of Rs 100 can be cut to half by going for the non-branch options.
There are cheques drawn on banks and there are cheques deposited with banks. In both cases you are charged for failed transactions. Usually, there are different charges for outstation and local cheques. Consider this. For cheques deposited with ICICI bank, it costs Rs 100 for local cheques and Rs150 for outstation cheques.
FAILED ECS TRANSACTION
Banks charge you every time an ECS transaction is rejected. Some banks have a flat penalty for all failed ECS transactions. Some charge more for second rejection in the same month. For example, HDFC Bank charges Rs 350 for every rejection in a quarter. The penalty for subsequent rejections is Rs 750.
You cannot make unlimited cash deposits and withdrawals for free either at home or non-home branches. For example, ICICI Bank allows four free cash transactions per month for branches in the same city. Thereafter, it charges Rs 90 per transaction.
There can also be a cap on transaction value.In case of HDFC Bank, there is no cap on the amount that can be transacted in the home branch. At non-home branches, customers are charged Rs 5 per Rs 1,000 for amounts above Rs 49,999.
AT NON-HOME ATMs
The rates are set by the Reserve Bank of India or RBI. Present rules mandate at least five free transactions per month at other banks' ATMs. After this, banks charges you per withdrawal. The limit has however been revised for six metropolitan cities. From November onwards, there will be a limit of three transactions per month from ATM of other banks and five from the same bank.
DEBIT CARD FEES
You have to pay Rs 100-500 a year for your debit card. If the card is lost or damaged, the bank will charge you for issuing a new one.
NEFT AND RTGS
National Electronic Funds Transfer, or NEFT, is a payment system for one-to-one fund transfer. Theprocessing charges are mandated by the RBI. For transactions up to Rs 10,000, there is a standard charge of Rs 2.50. Between Rs 10,001 and Rs 1 lakh, it is Rs 5. Between Rs 1 and Rs 2 lakh, it is Rs 15, while above Rs 2 lakh it is Rs 25.
Real Time Gross Settlement, or RTGS, transfers funds in real time on an order-by-order basis. For transferring Rs 2-5 lakh, the fee is Rs 25 and for above Rs 5 lakh, it is Rs 50.INTERNATIONAL TRANSACTIONS
International transactions cost 3-4% more because of the currency conversion charge. "If you make payments abroad through debit or credit card, a charge of 4% is added to the exchange rate," says Roongta.
SURCHARGE AT PETROL PUMPS
Next time you swipe your card at a petrol pump, note the amount of surcharge that you pay. SBI, for example, charges 0.75% for purchases up to Rs 2,000 and 1% for higher value transactions. Similarly, the ICICI HPCL debit card does not charge any fee for transactions above Rs 400.
For non-HPCL outlets, there is a surcharge of 2.5% of the purchase value or Rs 10, whichever is higher. Some cards also offer you a cash-back in partnership with oil marketing companies.
Banks also charge you for the balance updates they send on your phone. For example, ICICI Bank charges Rs 15 per quarter for the service.
The list is not exhaustive. There is a plethora of other charges for things such as signature verification and demand drafts. Since the list of charges is readily available on websites of banks, all of us should take a look at it to know what all we pay for.