Month: July 2012

Best Credit Card In India – Review of top 6 cards

Posted on by Jagoinvestor

Most of the people who apply for a credit card in India, do not pay much attention at the time of taking the card, but later get frustrated by the card itself for various reasons high bad customer service, hidden charges, and several other factors. The obvious question then is, which is the best credit card in India? We did a survey on credit cards and tried to do a review of credit cards based on participants experiences. We will see how these cards rate in 6 important parameters. There were 654 participants who took the survey, hence you can safely assume that the collective responses will give a near reality results.

Best Credit card in India

If you see the chart above you will know that the 6 top credit cards in India are –

  • HDFC Bank Credit Card
  • ICICI Bank Credit Card
  • CitiBank Credit Card
  • SBI Bank Credit Card
  • Standard Chartered Credit Card
  • HSBC Credit Card

6 factors to look at before you apply for Credit Card In India

Let’s see those 6 parameters which you should look at before you apply for a credit card in India. At the end of this article, we will see the detailed results of the credit card survey and find out how different credit cards performed on each parameter so that if some particular parameter is more important for you, you can just pick a card based on that parameter.

1. The interest rate charged on credit cards

The first parameter to look at while choosing a credit card can be the interest rate charged by the credit card company. It can range from 1.99% on the cheapest credit card to as high as 3.5% per month on the most expensive credit card. For most of the people who pay their bills on time, this parameter will not matter much, but you never know when you might get into a debt trap kind of situation where you start using your credit card to the maximum limit and pay the interest per month, at that point of time this factor will really matter. Note that interest rate charged is mentioned on a per month basis, but a small difference of 1% can be very big, considering it on a yearly basis.

For example, a 1.99% monthly interest rate actually means 27% Yearly and 3.5% monthly means 51% yearly CAGR.

51% yearly CAGR ! … means your Rs 1 lac of credit card debt can actually increase to 7.9 lacs in just 5 yrs if you don’t do something about it and obviously you will run around to improve your CIBIL score later!

2. Annual Fees & Other charges

A lot of credit cards charge yearly fees and renewal fees (at the time of renewal). Now a lot of people hold a Free credit card for lifetime, but that’s just bunch of people who were given the credit card on a telemarketing call, mostly because they are working in some big company and chances are higher that their usage of credit card will be much higher than an average customer, hence the free credit card.

But, a lot of people apply for the credit card themselves and for them, there are yearly charges (annual fees) and another kind of charges which is applicable to everyone. For example, the penalty charges if you don’t pay your dues any due date. There are tons of customers who do not pay their dues on last time and just pay the minimum payment. If this happens a lot with you, then there is a great chance that you also live with the myth of minimum payments on credit cards. So apart from annual charges, there can be charges like

  • Charges when you pay your credit card bill by cash in any bank branch
  • If you make a demand draft from your credit card
  • If you request for a duplicate statement
  • And many other credit card charges .. the list is not a small one 🙂

Note that if your credit card is FREE as of now, it might carry annual charges when it expires and you apply for renewal – and credit card company says – “Sir, we gave it 100% free only till the card is valid, now its renewed! “

3. Rewards and Offers on Credit Card

There are a lot of advantages of using a credit card in the form of benefits and reward points. For example – You get PAYBACK points which you can use to redeem at various places like www.bookmyshow.com, and book movie tickets by redeeming those points. You also get cashback benefits if you use the card at selected HPCL petrol pumps and you don’t pay the fuel surcharge too.

There are many other kinds of benefits that many credit cards in India offer and those can be different from one credit card to another. This is one very important factor before you choose a credit card because a big number of people just take credit cards for these benefits and even if you are not looking for these, you might want it in the future at some point in time.

4. Customer Service and Transparency

Once I called my credit card company (which is ICICI Credit card) because I wanted to know if there will be any annual charges on my credit card as the expiry date is over and I wanted to renew the credit card. They gave me a very clear and satisfactory step by step answer which made me feel – “Great” .

There was no renewal charges and no annual charges even after renewal. So I was happy. Now it was not the FREE thing here which made me happy alone, It was the way customer care talked to me and treated me like a human:).

While there are instances when I was not that happy, but overall on average, I would still rate the customer service of my ICICI credit card as “good” . Well, that’s my experience only and others can have a bad or worse experience with the credit card company. Before you apply for a credit card, you need to look at this very critical aspect of customer service and how transparent are they overall.

5. Convenience to pay the bills

Something which you will deal with each month is the payment of your credit card bill. Now almost all the credit card companies allow paying by net-banking, cheque, cash and other ways. But still, some banks can be really torturing and not that supportive. It can be cumbersome at times. There have been instances when people paid by cheque before time and it was not processed on time and the person had to suffer because of that and had to run around to get back those charges reversed.

Here is the example

I got the CIR and there is absolutely no big hiccups except one in ICICI bank credit card (I had lot of issues with this bank and some late payments od 1-7 days in some credit cards in very few months. Never listens customer and pathetic customer care executives) of which the DPD is consistently not (000) good for last 5 months. But hey it wasn’t my fault. I dropped the cheque of overall due (about 12000/-) and they never bothered to inform me that my payment was not credited (god knows what they did with cheque). After 5 months when they made a balloon of charges and the whole amount jumped to 19000/- they called me and threatened me of CIBIL. I was never in the mood to not pay the due hence paid the whole amount 19000/- notified by them. Could this lead to this much low score?? – Link

Not to mention the unfair update on CIBIL report which affects you for years. So it’s a critical factor to look at before you apply for a credit card in India.

6. How easy was it to apply for credit card

Have you gone through a frustrating time applying for credit card, really had to run around to get a credit card even when you were totally eligible to get one. While this criterion is not that big, as its a one-time event still you can consider it before you apply for one. I recently had a hard time opening a saving account for my brother with ICICI bank because they had no way to accommodate people living on rent with friends, however, Kotak bank did it for me, at that point of time, the “ease of opening the account” was really a big thing for me. In the same way ease of applying for a credit card can be one important factor at times.

Best & Worst Credit Card in India as per Survey

Below are the results of the survey which we conducted on credit cards. Have a look at it.

Best Credit card in India

If you look at the above chart you will see that the best credit card in India turns out to be Citibank Credit Card and the second best is the HDFC Bank Credit card overall. However, this does not mean that other credit cards are not good at all the parameters. ICICI Bank credit card is very close to all the other cards in several parameters.

While the SBI Bank credit card and HDFC Bank credit card top the list when it comes to interest rates charged (means they have lower interest rates compared to others), but HSBC Bank credit card comes last. HBSC bank credit card has not done well in any parameter as per the survey and has the lowest ranking in all of them.

Average Credit Card bill for the last 6 months

86% of people are paying less than Rs 20,000 per month as there credit card bills, that’s last 6 months average. Whereas only 2% of people had more than Rs 50,000 bills per month. I suspect that these people must be using their credit card for various mandatory expenses which are required anyways. Lots of reward points and benefits to them:).

Best Credit card in India

Credit Card Reviews from participants

Ramakrishna says on his Citi IOC Card – I am using credit cards from past 9yrs. If u use the credit card in the right manner, u get the most out of it. And make sure you pay your outstanding amount before the due date. Most of the times, by end of month I am barely left with the liquid and credit cards used to save during that bad times and used to pay the outstanding by the due date. I never ended up paying any interest until now. The best credit card to date to my knowledge is Citi IOC card. I had made use of the rewards and offers at the extreme.

Kriprabha on Axis Gold Card – Very, very bad – due to careless service. 1) Not pointing out auto-debit facility – I missed one annual fee, so from 300/- bill went up to 1000+. 2) Not applying their own rules about marking a lien on my FD Receipt — my card was blocked for weeks and no one seemed to know this requirement, and they kept assuring me the card would be activated soon. As of now, the card is inactive – reason unknown. I am snipping up a card today – want to avoid AMC which they will apply happily! These bankers live and work in air-conditioned comfort which is possible due to high ABQ. I will soon terminate my “relationship” with them. I am a senior, living on savings, so these visits to the bank cost a lot in auto fares.

Raghavendra on HDFC Credit Card – Experience with HDFC Cards has been good. I have never looked at the interest option since I’ve always paid the outstanding amount by the due date. Was charged a penalty a couple of times when I paid the outstanding a couple of days after the due date ( had not even paid the minimum amount by the due date, owing to travel), but the same was reversed after a detailed email to HDFC Cards requesting for the same, in light of good payment track record except for the 2 instances. On the rewards front, HDFC Bank does not have a very good rewards scheme as compared to others. But customer service is excellent. They also have two billing cycles, one of the 25th and the other on the 5th and allow customers to choose any one of them. This is useful for those who already have a card and choose a second to make optimum usage and take advantage of the alternate billing cycles

Atri on HSBC Credit Cards – I am using HSBC gold credit card for more than the last 7 years. I always submitted payments in time and even insured the card purchases. It was as good at their services and also at the part of mine but I do not know why in their review they decided to cancel my card and stop their services to me. I even asked HSBC CUSTOMER representative but they could nor reply satisfactorily. I now feel I should have to get a credit card from the Public Sector Bank only and wasted my time and money. My message to all public is to use Bank Account / Credit Card only of Public Sector Banks like SBI, Canara Bank, Central Bank of India, etc. for a good governance in the nation. Thanks and Regards.

Some more data out of credit card survey

  • Only 10% of people had 4 or more credit cards
  • Around 42% of people had exactly 1 credit card with them
  • The average number of credit cards held by one person was 2.03

Other Credit Cards

Note that this survey is focusing on top 6 credit cards and their comparison with each other only, which came out as the result of the survey, but there are several other banks credit cards in market which can be considered, but due to small amount of feedback in the survey, it was not sufficient to conclude anything about them nor do any kind of review about these credit cards. Here is the list of those other credit cards

  • Axis Bank Credit Card
  • Amex Credit Card
  • Kotak Credit Card
  • Bank of India Credit Card
  • Indian-Bank Credit Card
  • Bank of Baroda Credit Card
  • IndusInd Credit Card
  • RBS Credit Card
  • Syndicate Credit Card
  • Andhra Credit Card
  • Canara Credit Card
  • Corporation Credit Card
  • PNB Credit Card
  • ABN Credit Card

Did this article help you in choosing the best credit card in India? Is there any other parameter to look at before you will apply for a credit card? Do you think this survey helped you in choosing a good credit card in India?

Financial Literacy in School – very soon

Posted on by Jagoinvestor

Soon your children will start getting financial literacy in their school itself. A lot of developed countries like the UK, Netherlands, Spain etc have their national strategy for Financial education in place and a lot of other countries like India have been thinking and formulating this for a long time. Recently a draft for the financial literacy program was published on the RBI website.

You must have seen and experienced that our country average financial literacy is at pathetic levels and so many financial lives are destroyed just because they do not have minimum basic knowledge on personal finance to protect themselves. If your name is in CIBIL, its because you never knew the importance of right credit behavior, If you were missold (misbought) any financial product by an agent or financial planner (why not) – You probably always concentrated on numbers and not the hidden language and never were able to conclude the the returns from that financial product. In short you were not that financially literate.

The mission of the intiative is like this

To undertake massive Financial Education campaign to help people manage money more effectively to achieve financial well being by accessing appropriate financial products and services through regulated entities with fair and transparent machinery for consumer protection and grievance redressal.

You must probably be fantasicing that your kids will not be like you in terms of financial literacy and they will have a better level of information and understanding about personal finance compared to you. Thats where this national level initiative on financial literacy will help. It’s expected to be implemented in next 5 yrs period and you can be sure that it will arrive sooner or later, that will be a big day ! .

So what all your kids will learn about money in their Schools ?

There are 15 sections and sub sections defined and I can bet that even we all must grab the school level books on personal finance when it comes, because the list of topics to be taught is pretty good and deep. It will really help in shaping up the financial lives of those kids who study it. The best part is that as this will be school subject, they cant escape it. With their raw minds, they will be more open to learn it, unlike people today “who do not have time” . Once they learn about personal finance in school level, they will have a better chances of managing their financial lives when they start earning or well before it. Here are the topics (mostly spread across the full year) – Imagine something like “Hey I am bored in Maths Class, which is the next one” – “Personal finance Class!”

1. Money

  • History of Money

  • Barter System

  • Importance and Concept of money

  • Coins

  • Paper money

  • Plastic Money

  • E –Money

2. Household Economics

  • Earnings

  • Nature of Earnings

  • Needs and Wants

  • List your expenses

  • Find Simple ways to save money

  • Expenditure, Cost and Prices, Inflation

  • Savings & Thrift

  • What you save is what you earn

  • Borrowing – Mild Definition

  • Investment – Mild Definition

  • Interest — Mild Definition

  • Interest rate — Mild Definition

3. Banking

  • Definition

  • Role of a Bank – in growth of saving and Investment

  • Types of banks

  • Services offered by banks

  • Deposits and Loans

  • Types of A/c

  • Opening a bank A/c

  • How to Transact with banks

  • KYC norms – (A/c opening form, Address Proof)

  • How to read bank statement

  • Banking products and services

  • Net Banking

  • Calculating Interest –Saving, FD, Simple and Compound Interest

  • Power of compounding

  • Loans

  • Types of loans

  • Definition of EMI

  • Calculation of EMI

  • Difference between Banks and Money lenders

  • Micro Finance

  • How to make a complaint -Banking complaints

  • Ombudsman

  • Basic of Foreign Exchange

  • Importance and Use of Foreign Exchange

  • Check Counterfeit Currency

  • CIBIL

  • Regulator – Role of RBI

4. Investment

  • Piggy bank

  • Principles of Investment- Safety, liquidity and return

  • Bank saving

  • FD, RD, Post Office Savings

  • POMIS, NSC

  • PPF

  • NPS

  • Bonds and debentures

  • Shares

  • Mutual funds

  • Gold and Silver

  • Real estate

  • Arts and other investments

  • Commodities

  • Asset allocation

  • Risk and Return

  • Basics of Investment- liquidity, credit

  • Compounding and Time value of money

  • Nominal and Real Return(Inflation)

  • Effect of taxes

  • Long term v/s Short term

5. Behaviour Aspects

  • Concept of Needs and wants

  • Helping the needy

  • Spend wisely v/s waste spending

  • Conspicuous Consumption-lavish

  • Impulsive spending

  • What you save is what you earn

  • Using money responsibly

  • Avoiding cash payments

  • Insisting on bills

  • Dangers of excessive borrowing

  • Repayment of loans

  • Make informed choices

  • Ownership of your financial decision

  • Take care of your old ones

  • Tax payment

  • Insider Trading

  • Up Keep your Financial records

  • Free advise may be injurious

6. Financial Planning

  • Meaning

  • Household financial health check up

  • Important life stages

  • Education

  • Medical and other Emergencies

  • Social obligations

  • Goal setting

  • Budgeting

  • Marriage

  • Buying a house

  • Buying a vehicle

  • Plan a vacation

  • Retirement planning

  • Price of procrastination

7. Insurance

  • Meaning

  • Need and Purpose

  • Loss protection

  • Life ,non life and health

  • Benefits of Insurance

  • Term plans

  • Investment plans

  • Hybrid plans -Ulip etc

  • Agents, advisors

  • Role of Insurance companies

  • Regulator – IRDA

  • Ombudsman

  • How to take a new policy

  • How to revive old policy

  • Transaction cycle

  • Nomination

  • Assignment

  • Claims settlement
  • Exclusions
  • Difference between Insurance and Investment

8. Retirement and Estate planning

  • Concept

  • PPF, EPF, Gratuity, NPS, SCSS

  • Financial need after retirement

  • Three Stages -Saving, Accumulating and Dis-saving

  • Calculation of Corpus required after retirement

  • Protection from Inflation

  • Reverse Mortgage

  • Definition of will

  • Making a will

9. Securities markets

  • Entrepreneurship

  • Forms of Business enterprises

  • Company definition

  • Shares

  • Primary market – Reading a prospectus, what to read

  • Secondary market

  • Issuers, Investor and Intermediaries

  • Regulator – Role of SEBI

  • Dealing in Securities market

  • Demat account and Depository

  • ASBA

  • Broker

  • Stock exchange

  • Grievance and Redressal

  • Financial Advisor, CA, CFP, CPFA

  • Basic terms and processes in Securities Market

  • Market rumors and tips

  • Sources of reliable information

  • What are indices ( Sensex and Nifty)

  • Investment v/s Speculation

10. Use of Technology Do and Don’ts

  • Password protection

  • NEFT and RTGS

  • ATM

  • Online trading

  • Internet banking

  • Need for keeping mobile number with banks

  • Three in one account

  • Need of protecting your online account

  • Functioning of stock exchanges

  • Depository working mechanism

  • Algorithmic trading

  • Financial functions using excel

11. Scams, Frauds and Ponzi Schemes

  • Free tips

  • Insider trading

  • Money laundering

  • Phishing mail about winning a lottery

  • Price rigging

  • Dabba trading

  • Bogus companies

  • Multi level marketing

  • Schemes not regulated by anyone

  • Real Estate frauds

  • Banking and credit card scams

  • Preventive measures from getting duped

12. Borrowings Need for borrowing

  • Need for borrowing Source of borrowing

  • Merit and demerits of borrowing

  • How much to borrow

  • Avoid life of credit

  • Comparing interest rate on loan offering

  • Importance of timely payment

  • Avoid default

  • Avoid borrowing for conspicuous consumption

  • Credit cards – Merits and Demerits

13. Consumer protection and redressal mechanism

  • Rights of Consumers

  • Applicable to Financial services

  • Filing a complaint

  • Complain to entity concerned

  • Ombudsman

  • Regulators

  • Arbitration

  • Consumer courts

  • Govt. Websites -(PG Portals)

  • Investor Associations

14. Taxes

  • Meaning

  • Need of taxes

  • Types of taxes

  • How taxes impact income

  • Income, wealth and gift tax

  • Service tax, STT, Stamp Duty

  • Tax planning v/s tax evasion

  • Tax rates

  • Tax free bonds

  • Tax saving investment

15. Importance of maintaining financial records

  • PAN and its utility

  • Aadhar card

  • Demat Account

  • Bank statements and passbooks

  • Insurance policies

  • Tax return

  • Property documents

  • Helpline numbers of service providers

Note that this curriculum is also planned to be delivered to non-school people like adults through other various means. School is just one place where it will be implemented.

What do you think about this Financial Literacy Initiative ?

What do you think about this initiative ? Do you think its going to be one of the best things in our country in the area of financial literacy ? What kind of changes do you see after this Financial Literacy Initiative comes and our next generation arrives !

First 5 yrs of your earning life – Does it matter ?

Posted on by Jagoinvestor

A lot of people complain that they do not have much wealth in their life despite earning from many years. This brings an important point in question. What did they do in the first 5 yrs of their earning life? It’s very clear that the first 5 yrs of your earning life leaves a very big impact on your future financial life. Your financial life shapes a lot due to the first 5 yrs of your financial life.

There are 3 possibilities

  • A person has saved & invested a maximum of his earned money in first 5 yrs
  • A person has spent a lot of his earnings in the first 5 yrs.
  • A person has kept a balance between his spending and investments/saving in the first 5 yrs.

Are you one of those who started young with a nice paying job, but did not focus on your first 5 yrs or are not focusing on it right now. You feel the future is so promising and your abilities/expertise are so great that you don’t need to worry so much. It happens because at times people are seriously unaware and ignorant that life turns out very differently then they think. There are many events which demand money and attention at any cost. These are some times unplanned or just popup in life if you had not planned for it before – like Job loss, Marriage, Sudden health-related expenses, etc. The moment these events happen or come near, then you realize – “Oh my god – I never planned for it or I underestimated how much money I will need”.

In my book Jagoinvestor there is a chapter where I explain how your first 5 yrs investments, out of a 30 yrs period make the 50% final corpus and rest another 25 yrs makes another 50% corpus. That means the initial 16% tenure makes 50% corpus and later 84% tenure builds rest 50% corpus – (read sample pages)

So if you are 5 yrs late in saving and investing for your retirement – You will end up with 50% less in your retirement – This might not sound too scary, but it is. This could mean looking for a part-time job compared to an enjoyable retirement without much tension. There is a big difference between what 50% less corpus can do. It’s like earning Rs 30,000 per month from next month compared to Rs 60,000 right now, imagine your life from next month.

Early years of your earning life

 Spending Maximum vs Investing Maximum

Let’s talk about the first two possibilities mentioned above – “Spending Maximum” vs “Investing Maximum” . Let’s say there are two guys who earn 75,000 per month. Both are unmarried (we all are, at the time of getting a job and next few years, possibly 4-5 yrs) and have similar conditions.

The first guy operates from the mindset of  “Life happens now and this is the time to spend, who knows about future“ , however, the other guy operates from the mindset of “Life is uncertain, I can save today so that I can protect my future now”. Both are ideologies and the way you think, but it can have a drastic impact on your life. Because your financial life operates like a chain reaction. What you do in the first year, has some impact on 2nd year, what you do in 2nd year affects your 3rd year and so on, obviously assuming that your pay rise is natural and not shoots from 3 lacs per annum to 13 lacs per annum in short term.

If you are struggling to make a down-payment for your dream house TODAY, you can clearly see your early 5 yrs have been and identify that point where you could have been more responsible, where you could have given your financial life a new direction and shape. If you are not able to fulfill your big goals coming soon, it’s a clear indication that you have done something wrong in the first 5-6 yrs of your financial life or early years. In the same way if you are at peace today, you can clearly identify what right things you did at the start of your career.

Real-Life Experience of Saving Early in Life

One of the readers Ashish shares his experience about how he saved early in life and how his life is right now.

After completing my study in 2004, I started my career in IT industry. Three thing was clearly injected in my mind by my father :-

1) Always maintain the cash for emergency. As in emergency cash is primary and relation is secondary.
2) Never go for loan. If you need money, first check with your relative and don’t mind paying interest on the money you owe from them. It will always be cheaper then bank. If no help available, consider the thing is not worth to invest.

3) Respect your money.

Though I am not obedient son of my father but “Money matters”. So I started maintaining one excel sheet about my expanse. I must say with my experience that daily expanse is not cost you more if you spend smartly. So at the start of my career, I compromised on my comfort level. Instead of staying in separate house, I searched for shared accommodation or PG which really helped in saving a lot. Instead of buying bike, I calculated my per-day travel expanse and tried my best to minimize it by sometime taking lift with office colleague :)

Travel and Stay is the biggest expanse as per my experience and this clicked me an idea of buying a house. I was not capable enough to buy the house, so instead of taking loan from bank I knocked my father’s door and able to convince him on 4% interest rate(following papa’s advice). No need to say that I paid 4% or not, but he is happy to see the value of that flat on today’s rate. But I was not able to stay in that house for more than a year as I changed my job very frequently(at least once or twice in a year) and happily rented so far.

I travelled from Gurgaon–hydbd–Noida–Pune–Mumbai and then finally got chance for onsite UK in 2008. I applied the same logic and maintained at least 1 lac saving per month. And the story continued since then on saving more and spending less. With this, I am able to manage to renovate my own house for my parents (which they call now as my house officially :) )

Then I married in 2009 on my own expanse and came back to India last year when we both thought that there is no place better than India on this earth. And it get proved as well, when my wife also got the job in same company and same building :) . Before coming to india, I showed no interest in paper form investment except ppf and property investment. But after becoming the member of JagoInvestor and reading some well written and advices article, I did another smart investment. 60 + 40 lac term insurance for me an my wife from two different company. One personal accident insurance of 40 lac from LnT for myself.

SIP of 8k per month in different MFs , which I considered after reading one of the article on jagoinvestor where the comparison was made with child plan and other investments and purchased one villa plot in Bangalore. So far no Loan :) . So far the story is this but adding new pages everyday… I know there are more happy family out there but just want to say that “Saving does help not hurt”.

I would say your life has a constant amount of comfort in your financial life, it’s your choice when you want to have it, at the start of later years or keep a balance in start and end. The best approach I feel is to 1st year your earning life to yourself, enjoy, spend and do what you always wanted. After the first year just get damn serious ! .. What do you think?

Is your Company Group Health Insurance Cover Enough ?

Posted on by Jagoinvestor

Are you covered under your company’s group health insurance policy? If you are a salaried person, then in all probabilities you must be having your employers health insurance plan which must be covering you, your spouse, children, and parents or some of them. But a lot of people do not want to take a separate health insurance plan from health insurance companies and just want to continue their employer’s group health insurance cover as it looks most affordable Health Insurance to them. However one should also consider an individual health insurance plan for various reasons. Let’s see a few points which you should think about your employer’s group Health Insurance.

Group Health Insurance

1. Your Employer may take back the Health benefit

Health Insurance costs are provided as a perk in many companies. Health Insurance costs are borne by companies themselves and it might happen that in future your employer might take back the benefit of health cover and tell you that it’s not available now onwards. Either you just don’t get it or you need to pay the premiums yourself, just that they can assist employees to get it faster. The other thing which can happen is that they can also reduce the cover itself to lower their burden.

2. Your company may exclude your parents from the health cover

Its something which has already started in many companies. Earlier parents were part of the employer’s health cover, but these days a lot of companies are excluding parents from the health policy provided to the employees. If this happens then anyways you need to cover your parents with an individual health insurance plan.

3. You might not get health cover with your next employer

This is pretty obvious. Not all companies provide health cover in the same way. What is the guarantee that you will get the same kind of cover and benefits in your next companies? I hope you are not going to argue that you will never leave your current job, many people have this point when they argue that they have the cover with their current employer, but then you never know about the future.

4. Will it help you in retirement?

By now you should have been clear that you need health insurance more for your bad days, when you cross 50 and reach your retirement because health insurance is a long term policy and you should always take it considering it for next 20-30 yrs. Things like lifetime renewal and no co-pay in later years are sought after features these days. So even if your employer provides a good health cover right now, what about retirement? When you go to health insurance companies later to buy the plans, be sure that you will not get it or you will pay in gold!

5. Do you have enough Company Health Insurance Cover?

Not many, In the recent survey we did on health insurance cover, the fact that 60% of people (on this blog) have their health insurance cover less than 50% of their annual take-home, now a lot of them must be having it from their employer. Don’t see that you have a health cover, look at the quantum of the health cover? Ask if it is enough for you? Is it something that can support you in case something goes wrong!

Good point about Employer group Health Insurance cover

I don’t say, your employer’s’s health insurance cover is bad. All I am saying it apart from your company health insurance , you might also want to look at a separate policy , that’s all . Some of the best things which an employer health insurance provides is that its easily available without any limitations and restrictions. If you are an employee and the group health insurance is there, you will get it even if you have any pre-existing illness . No one denies it because of a higher age or any past history.

Make sure you have independent Health insurance cover 

The point is that an employer group health insurance cover is a cover which is linked with your employer and hence dependent on him, Its so tied with your company. You should aim at having at-least one independent health insurance plan in your life which you can cover and control, This should be in addition to your employers group health insurance plan.

Do you agree with these points ? Do you think one should take a separate health plan apart from their employers group health cover ?

2 Credit Card Tips I learned from others

Posted on by Jagoinvestor

Do you want to know some credit card tips which you can use in your life ? In all probability you must be holding a ICICI, HDFC or SBI Credit Card and must be wondering how to use it effectively ! .  Credit card is used by almost everyone now a days and utilizing a credit card features is an art -I would say. It needs discipline, attitude and the right mindset to be used. However I came across 2 very good credit card tips, which were discussed by few readers on the comments section and hence this article bring forth those tips and tricks to you. These following tips are really good, but only for those who want to really squeeze out the benefit of their credit cards and not for someone who likes to keep it simple. Let’s see those credit card tips:

Credit Card Tips 1 – Making short term Fixed Deposits

Most people know that by the end of the month, they will get a credit card bill and they will have to pay a good amount of money towards it. Now imagine this situation – You will most probably have a good amount of money in your savings bank account which you know would be utilized towards paying off the credit card bill and you make sure that the money stays with your account. You don’t spend it or invest it anywhere because it already has a purpose and it also improves your credit score and report

Now the simple tip here is, that just see how much is your average credit card bill each month. It can be 10,000, 15,000 or 20,000 at times, but if you know that generally the maximum you get is around 20,000. Then instead of keeping that money in your bank account, you can just do a short term fixed deposits in that start of your billing period, so that instead of earning mere 4% in a saving bank account, it will earn some 7%. The idea is to create around 90 days of fixed deposit each month for your average credit card bill amount. So what will happen that from 3rd month, you will automatically get those FDs matured and you will have the money ready. I said 90 days so that the interest rates you get are better. I can see that my ICICI bank is giving 7% for 91 days deposit. If your bank provides good return in 30 days, better make 30 days deposits.

Important : Do this only if your bank provides the online facility of creating fixed deposits and you would like to get better interest for your money in short term along with eagerness to pay off your credit card debt in full every time. At time this can look like over optimization, but its up to you. Now if you like it, take it, else let it go. Thanks Suhas for this trick .

Credit Card Tips 2 – Have two credit card with different billing cycle

You can get the maximum credit of 55 days on a credit card if you make the purchase in the start of the billing cycle and have a grace period of 25 more days (30 + 25 = 55). But you can not always make big purchases in the start of the billing cycle to get maximum credit, a lot of people make this mistake because they do not understand minimum balance in credit cards . So in that case the tip is to have 2 credit cards with two different billing cycles preferably having a gap of 15 days between them, you can use one credit card for first 15 days of the month and another one in the  second half. So for example you can have credit card A which has billing cycle from 1st Apr to 30th May and another credit card B whose billing cycle is from 15th May to 14th June.

So this way you can use the credit card A in the first half of the month and B in the second half. Note that though this involves 2 cards and requires a little tracking , but it will really help someone who uses the credit card a lot and would like to get benefit of maximum credit period almost all the time. Thanks Vareen for the tip.

What do you think about these credit card tips? Are they over kill!

Does Govt work for Financial Services?

Posted on by Jagoinvestor

This is not an allegation, but I want to understand how things are related and putting 3 points which shows how govt policies are influenced by the financial services sector.

No tax on Saving Bank interest up to Rs 10,000

Some time back, there was this craze for liquid funds. The money will earn a much better return compared to your savings bank account and the money is highly liquid. You can get it in 1 day if you want it. This started making people believe that liquid funds are as good as saving bank account and people started parking their short term money in liquid funds. At the start it was just done by few people, then through advertisements, newspapers, websites etc, most of the investors came to know about this and started using to park their money in liquid funds.

What happened due to this?

When you don’t leave a lot of cash in your savings bank account, banks do not have enough money in their pool to further lend. Less money is available for them to use it for lending, less money is there to do anything. Note that saving bank money is the cheapest source of money to banks. All they need to pay is 4% (6% is mostly given for amount above 1 lac only). There is no alternative for the bank to find this cheap money. This issue was big for banks like SBI, ICICI, HDFC, and other several banks. What could be done?

This rule came in – “No tax on interest in saving bank account up to Rs 10,000”, a nice incentive for people to keep their money in Saving bank account, hence banks are benefitted by this move! This happened in this budget 2012 – Not very sure how it happened but from where this rule came in this budget? Can someone find any links!

No Indicative returns on FMP’s (Fixed Maturity Plans)

Fixed Maturity Plans (MP’s) are just like Fixed Deposits. FMP’s were allowed to give indicative returns and they could say – “You can expect a 9.4% return in one year”, this is when bank FDs were at 7-8% . FMP’s were also “extremely safe”. So a person wanting to put his 25 lacs in FD for 1 yr , could see that extra 1-2% return without much extra risk (he thought so) and the tax advantage was higher in FMP’s compared to fixed deposit (this was bonus). I hope you know that one of the biggest share of mutual funds investments go into FMP’s (not equity funds btw).

So What happened because of this?

Banks FD’s were affected, People started looking at FMP’s as alternative of the Fixed Deposits . The “indicative” returns were the issue, those were perceived as “guaranteed return” and people started flocking to FMPs, at least the bigger ones. No, I have no idea, but suddenly there was news sometime back that FMP’s are not allowed to declare any indicative return. I truly don’t understand why this rule came into existence. Can someone also find a link here?

LIC bailing out Indian Stock market

Markets sometime go up and down, but when its down, it puts pressure on a lot of people. Govt is one of them. Markets down for years is not a strong sign of a booming economy, so govt has vested interest in markets going up and look good. In the same way there are tons of PSU companies which are doing bad and no one wants to touch them. ONGC was one of the earlier and at the moment Air India is another one.

Can anyone really connect the dots why LIC invested in ONGC ? Can anyone tell why LIC invested 60,000 crore in 2011-2012 in stock markets? LIC might have thought that markets are low, but what is the reason to put 50% of its equity investments in PSU stocks? Did someone ask it to do so?

Subra has a point to make on this:

LIC’s top management has only ONE BOSS to please – the ruling party (not the government, note). This is scary. When I see fund managers beating the Sensex and the Nifty, I realise that it is by being underweight on the PSU stocks. LiC does not have this choice. (Source)

Comments? Do you think govt is really influenced by Financial Services Sector ?

Transfer PPF account from Post Office to SBI Bank

Posted on by Jagoinvestor

How do you transfer the PPF account from Post Office to SBI Bank? This has been a big question mark for all the PPF account holders who opened their PPF account in Post Office and now want to transfer PPF account to SBI Bank or other banks so that they can take benefits of online money transfer to their PPF accounts. Also, it becomes easy for them to do another kind of activities if the PPF account is in some bank.

Transfer PPF account from Post Office to SBI Bank

So, in this article we will see the steps required to transfer PPF account from Post office to any Bank. In this example, we will use SBI as an example. But you can use the same procedure for any SBI Bank or its subsidiaries or even ICICI Bank which has recently started providing PPF accounts.

Steps required to Transfer PPF account from Post Office to SBI Bank

 

Step 1 The first step is to make sure your PPF Passbook is updated with all the interest credited to date. You need to go to the Post Office and get it updated.
Step 2 Fill up following documents

  • PPF Transfer Form SB-10(b). Download Form to transfer PPF Account here
  • An application on plain paper requesting PPF Account transfer from Post Office to SBI Bank
  • Incase you already have an SBI Account, then SBI passbook (Will fasten the process)
  • PAN/Address Proof (Can be confirmed at Post Office)
Step 3 Submit the form to Post Office Head PostMaster, He will verify your signature with the records at Post Office and verification will be completed.
Step 4 The balance in your PPF account in Post Office will be taken out and your PPF account will be closed by Head Post Master and he will note the remark of Transfer of PPF Account to SBI Bank on all the relevant documents.
Step 5 The balance amount in your PPF account will then be remitted back to State Bank of India through Cheque or Demand Draft along with other relevant documents.
Step 6 Your PPF account will then be opened (transferred) at SBI Branch and you will be notified on this. It would be better to not wait for it and you yourself keep track of the progress.

 

Go to SBI bank after all these steps are done and collect your new PPF Passbook. Note that all the previous entries of your Interest payments etc will not be present in the new PPF Passbook. It will only have the new and current entries now. So in-case you needed the previous information for claiming tax deductions, better take the printout of the previous PPF Passbook and keep photocopies of all the documents you filled and submitted for PPF Account Transfer. Read  – How to open a PPF account at SBI Bank

What about the interest part when you Transfer the PPF account from Post Office?

Do you know How PPF interest is calculated? Its only a monthly basis , but credited yearly. Now as per PPF Rules, the bank or the post office transferring the account will add interest up-to-the preceding 31st March in the account before it is transferred. The interest from 1st April onwards will be added by the transferee office after the close of the year. As per rule 8 of the scheme the interest in the account has to be added at the end of the year and not in the middle of the year in any case. So make sure to ask and confirm from Post Office Postmaster if he will do this step or not. And once the PPF Account is transferred, at the end of the year, make sure you get the total interest in your account. Just verify it at the end of the year.

What Problems you are can you face while Transfer of PPF Account?

Problem 1: The biggest problem you will face is the ignorance SBI & Post office employees have about this whole process. I think the Post Office Employee has more information (and less ego) than SBI Employees. They might reject the whole idea and say “It’s not possible to transfer”.

In that case, take the print out of Rule 153 of this document which is at the Post Office website and clearly defines the rules to Transfer PPF Account from Post Office to SBI Bank. Another thing you can do is very humanly and in a soft voice, tell them you will file an RTI to know the process of PPF Transfer from Post Office to SBI Bank and would come back with that RTI query (Post Office and SBI comes under RTI incase you didn’t know). I am sure this will be enough to speed up the whole process.

Problem 2: Another problem you may face is documentation, I am not very sure if PAN card/Address proof is required or not and what other documents, but in that case again take the help of your Post Office Head Post Master, he will surely help you. If you are stuck at any point, use sentences like “I will file an RTI and …”. That might help you 🙂

Share your experiences, and problems you faced when you wanted to Transfer PPF Account from Post Office to SBI Bank or vice versa, were you waiting for this from many years?

Financial Planning Survey in India

Posted on by Jagoinvestor

Jagoinvestor recently conducted a online Financial Planning Survey in India and what a common man expects out of the financial plan and a financial planner. I will list down some key observations, some learning based on survey results and finally compilation of the survey in a decent pictorial graph. Note that the survey was also published by Mint Newspaper. Here are the survey results:

Key Observations

  • Total 869 people participated in Survey
  • 93% respondents were Male, 7% female
  • Trust Factor and Honest/Integrity was highest on rating. 92% said that the trust factor is extremely important, 93% said honesty and Integrity is extremely important.
  • Mumbai and Bangalore had highest number of respondents with 17% each Chennai and Hyderabad was lowest in Metro category, NRIs were 2% of overall survey
  • 21% respondents were having income of more than 10 lacs
  • Top 3 professions were Software (30%) and Finance (13%) and Govt (8%) . The smallest was BPO
  • Only 15% people said that Size of the Financial Planning firm is “very much important” to them
  • Only 9% people said that “appearing on TV/newspaper” matters to them , 62% clearly said that its “Not much Important” .
  • 83% people said that they expect or look for Sample Financial Plans before hiring a financial planner.
  • 85% people said that they expect clean financial plan with tables/graphs into it.
  • 91% people said that Discounts of Fees does not work if they dont see any value in them .
  • 75% people said they will not go for any financial planning with corporates like ICICI Direct, Edelweiss or such firms.
  • 90% people said that they will buy products from their financial planner only – if its a CHOICE, only 10% said they will not.
  • About 58% people know less than 2 planners in India by their name, 21% know no one!
  • 68% people feel that Financial Planning would have improved their financial life if they had taken it 5 yrs ago
  • 74% people are very clear that they will hire a planner sometime in future if they get a RIGHT one .
  • 73% people expect less than 20 pages in their financial plan , Only 12% said they would be happy to see more than 30 pages
  • Most of the people do not want the welcome message and those stories in their financial plans
  • In More than 10+ lacs income category , 42% people were from Software jobs
  • In more than 10+ lacs income category from Bangalore , 74% were from Software  and from Mumbai it was just 14% in Software , 48% Others
  • 68% of Govt jobs holders were from Non-metro cities and 60% among them had less than 5 lacs income per year

Financial Planning survey in India

Learnings for Financial Planners/Advisors out of Survey

1. Different Cities have their target markets

Each city is different from other. A Planner in Bangalore should mostly be targeting Software professionals (62%) rather than Doctors (1%), compared to some one in Delhi which had only 20% in software

2. Have a Dummy Sample Financial Plan for prospects , but make it beautiful

There is no doubt that prospects wants to know what they can expect from planners when it comes to that PDF which has things written to it, I know that one PDF is not Financial plan and it does not matter, still thats one tool to impress the prospect and show them what value one will get out of it .

3. Make your plans more attractive , clean and with tables/graphs

Its a clear indication that clients are not looking for 100% pure wordings in the plan, they expect some kind of tables or graphical representation in the plan. But make sure its only at places where it adds value or is required.

4. Don’t worry if you are not on TV or Newspaper

Being on TV/Newspaper is really a great way of increase a financial planner visibility, but only a handful of prospects will prefer a planner coming on TV than some one who is not . Coming on TV is good, but its not the business secret or the top most thing you should be looking for. 56% of survey takers said Appearning on TV/Newspaper is Not much important factor and only 37% said it was complementary , just 9% said that they would like to have some one who appears on TV shows or writes in Newspapers . However its very much clear that these factors increase visibility and helps a planner to increase trust .

5. Trim your Financial Plans to the point and short

A very big number said that they would like it to be less than 20 pages . Hardly few clients will read each and every page in great detail , for most of them what matters is the “solution” and how things look like . The maximum a plan should be of 25-30 page . More than 30 pages is some not expected from most of the clients.

6. Investors are afraid of Big Corporates companies For Financial Planning

Thanks to all the bad treatment all these years , big corporates firms (banking etc) , people are really not very much keen to go to them for financial planning . People seem to be more interested in pure financial planning firms or individuals .

7. Dont push for products – Clients will anyways buy it from you

I know most of the planners have experienced it already. 90% of the survey takers said that they are almost sure that they will buy the financial products from the planner/advisor only and will not go anywhere else . However a planner has to keep 2 things in mind. a) This point is true only if a client is satisfied with your work and is a happy client . b) At no point you should be pushing products to them or give them any feel that you are there just to sell them products (Too much product push is one of the biggest turn off) , hence just do what you should be doing and almost all the clients will buy the products from you, unless there is some other strong reason not to buy

What do investors think about this Financial Planning Survey in India ? 

As a reader of this blog and someone who might be one of the investor, what do you think about this survey and the results ! . Do you agree with it . Do you want to point out something and talk about it ? Jagoinvestor also provides financial planning , you can look at our services page here

Free Tax Filing for Women in India by Cleartax.in

Posted on by Jagoinvestor

Cleartax.in – a tax filing portal has made tax filing for women totally free. Women all over India can now file their tax returns for free, sitting at home at www.cleartax.in . Women will have free access to its very user friendly tax filing website till July 26, 2012. The ClearTax platform is an easy to use to file one’s tax returns. The offer is an initiative by the company to invite women to take ownership of their finances.

Cleartax observed that  more men than women e-filed online with them and their team learnt that in aggregate, women spent significantly less time paying attention to tax planning and personal finance compared with men. Jagoinvestor had done an article on Women & Personal Finance which revealed how 88% or more of urban women (who are well educated and live in big cities) have Zero or very less personal finance knowledge. Most of the tax filing work is handled by their father or husband and they generally refrain from any taxation related work.

What you can do ?

You can spread a word about this into your office and share it with all the women employees, you can also use this opportunity to file taxes online for your wife, sister, mother or any female relative.

Best Mutual Funds House [Graph]

Posted on by Jagoinvestor

Which is the best mutual fund House ? Is HDFC better than DSP Black Rock or Reliance ? A very good way of looking at it is to see all the equity oriented mutual fund schemes of a fund house and check how many of them have outperformed its benchmarks in different time frames like 3 yr, 5 yr and 7 yrs?

For instance, Birla Sun life which has 16 equity funds with more than 5 yrs of history, but out of those 16 funds almost 8 of them have not outperformed its benchmarks, which is not very encouraging. The same kind of scenario is with SBI & UTI mutual fund houses.

On the other hand if you see HDFC , Franklin templeton, Reliance & ICICI Prudential Fund house, they have done much better, a higher percentage of their schemes has outperformed their respective benchmarks. Its a very clear indicator of a AMC overall performance . So its very important to understand which AMC’s are doing better over their whole basket of mutual funds and which are not. Below is an info graphic which I have re-aligned using a PDF document published at Livemint article here . Credit goes to Kayezad E. Adajania from Livemint who has done this research. Good show !

Best Mutual Funds AMC

100% of HDFC Funds outperformed their benchmark

You can see in the above graph that only HDFC is one fund house which has all its equity schemes outperform its benchmarks in 3 yr, 5yr and 7 yr category. Which Mutual funds are you invested in? Do you feel you should move to the fund houses which have shown better performances ?

Which mutual fund AMC is your favorite and why ? What do you have to say about this study ?