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8 ways to Upgrade your existing health insurance cover – know more about healthcare inflation

Posted on by Jagoinvestor

Is your health insurance cover enough at the moment? May be No! And you might want to increase it now. But if you feel that your health insurance coverage is sufficient right now, even then, it will need an upgrade after another 5-10 yrs.

Healthcare inflation is on rise in India and there is no way you can live with the tiny health insurance cover for rest of your life.

So let’s check 8 ways you can upgrade your health insurance cover.

Upgrade Health Insurance Cover

If you have bought your own personal health insurance before 2010, in all probability, you have sum insured coverage of less than Rs.4-5 Lakhs.

While it’s great to hear that you at least have your own independent health insurance, and are not dependent on your employer health cover, it’s high time you realize that with the skyrocketing healthcare inflation, the sum insured you have is too low to even cover one hospital bill, leave alone cover you for your hospitalization expenses in your retirement years.

The amount of health insurance coverage you need has already been addressed in one of my earlier posts. What we are going to discuss here are the options available when one is looking for upgrading his/her coverage

8 ways to upgrade your Health Insurance Policy

There are various ways you can increase your health insurance cover. Below are some of them mentioned.

#1. Upgrade later, when needed

Though this may look like the most cost effective, ‘smart’ thing to do, mind you, this is the diciest options of all. Health Insurance companies will accept your upgrade request till you are young and healthy. No one wants you to enter their portfolio or books, once you are old, grumpy or dying.

Jokes apart, even if one of your family members suffer a chronic ailment like Diabetes, Thyroid etc. or worse make a claim in the health insurance policy, your chances of upgrade in the policy are almost zero.

If you are not aware, let me clarify – whenever you apply for an upgrade, you will have to make a fresh application to the Insurance Company for the upgrades giving declaration of any new diseases contracted etc. The insurance company will then evaluate the upgrade request similar to a new application and decide.

All said and done, even if the upgrade is approved, all waiting periods are applied to the upgrade part of the policy, from the year of upgrade, and not retrospectively.

#2. No procrastination. Upgrade your cover now

This is by far, the most ideal option if you have a lifetime health insurance plan and your family is reasonably healthy. Just apply for an upgrade to the highest coverage available first, before you try anything else, including a Top-up plan.

Yes, you will have to request for the upgrade at the time of renewal by filling an application, which will be subject to approval of the Insurance Company. If you one of you family members have had a claim for a chronic disease, you must explore upgrade for all the other members. If you are all covered under a floater, you can apply for a separate plan (explained in point 4).

If you are covered under individual plans, ask for upgrade for the remaining members in the same plan.

#3. Port your health insurance cover + upgrade

If the sum insured you have is the highest available with the current Insurer, you can explore the option of porting your policy to another product within the same insurance company, or another insurance company, which has higher coverage plans.

Note, for portability, in most cases, you need to apply to the new insurance company, 45 days in advance. While applying for portability you need to request for your preferred sum insured in the proposal form. Of course, you will get portability only for the existing sum insured and not for the upgraded sum insured. The waiting periods will start again for the upgraded part of the coverage.

#4. Buy second Health Insurance policy

If the sum insured you have availed is the maximum sum insured offered by the Insurance Company, and portability is not possible as explained above, another option is taking a second health insurance policy from another Insurance Company.

If you ever claim above the sum insured of Policy 1 you can always claim from Policy 2 for the rest of the claim. Ensure you inform about the existing policy in your proposal form for the new policy.

#5. Top-up Cover

Though Top-up plans are recently a popular option to increase your health insurance coverage, you need to understand how they work, before you sign-up for such plans. The policy provides a high coverage with a threshold amount upto which you cannot make any claims.

For instance, you buy a 10 Lakh cover with a 3 Lakh threshold (also called deductible) – you will be able to claim in this policy only when you have made claims of above Rs.3 Lakhs.

top-up health insurance cover

There are primarily two types of top-up health insurance plans :

1. Top-up health insurance:

Per claim deductible: Here the top-up coverage will trigger only when one hospitalization claim crosses the threshold sum insured.

For instance, if in the plan in the above example, there are 2 claims in a year of Rs.2 Lakhs and Rs.3 Lakhs each, the top-up coverage will not trigger since none of the 2 claims crossed the “per claim threshold” of Rs.3 Lakhs. On the other if there is one claim of Rs.4 Lakhs, then the top-up policy will pay the remainder Rs.1 Lakh, as per the terms and conditions.

2. Super Top-up health insurance:

As the name suggests, this is a better version of a top-up plan. Here the coverage will trigger even if the sum total of all claims made in a year cross the threshold sum insured. In the above example, where there are 2 claims made, both the claims will be paid, upto the sum insured of Rs.10 Lakhs.

Unfortunately, there is only United India which provides this plan (albeit, with a lot of reluctance) HDFC Ergo and Max Bupa are in the process of releasing such a plan, soon. Watch this space.

#6. Critical Illness Plans

In most cases, a high coverage of health insurance is required due to contraction of a critical illness like Cancer, Paralysis, Heart Attack, Kidney Failure, Bypass Surgery etc.

A Critical Illness Plan provides a lump sum benefit irrespective of the actual expenses incurred provided the insured person is diagnosed for a listed ailment and survives for 30 days. Taking coverage of around Rs.5-10 Lakhs for critical illness is a good option. The only flipside of this plan is risk of suffering an ailment not listed in the policy.

Ensure you take a policy which covers an extensive list of illnesses, at least till the age of 70. There are plans which provide coverage for a list of 20 ailments.

#7. Defined Benefit Plans

Defined Benefit Plans provide fixed compensations against list of surgeries, irrespective of the actual costs incurred. For instance one plan pays a fixed benefit of Rs.1.00 Lakh for Angioplasty, Rs.2 Lakhs for a Bypass Surgery. These plans pay such claims based on minimal photocopied hospitalization papers.

Additionally these plans provide a host of other fixed benefits including fixed amounts per day of hospitalization etc. These plans are different from Critical Illnesses which are based on diagnosis, while these plans are based on actual hospitalization and surgeries.

#8. No Claim Bonus Plans

Given a choice, if you are going for a fresh cover, go for plans which provide No Claim Bonus (Increase of sum insured every year) rather than No Claim Discount (decrease of premium). This helps an assured increase of your coverage every year till you don’t make a claim.

Most good plans provide a bonus of at least 50% of the base cover. Of course, this is not a long term as one claim completely wipes out this bonus at the time of renewal of the policy.

Note – In my 2nd book – “How to be your own Financial Planner in 10 steps” , you can read about Health Insurance in the 3rd chapter

Watch this video to know 9 rules to keep in mind while buying a health insurance:

Top-up Vs. Super Top-up Vs. Upgrade Existing Policy Vs. Buying additional Policy

Most Insurance advisers recommend a top-up plan to increase your health insurance cover. In terms of convenience of purchase and claims, we would recommend upgrade of the same health insurance policy, as the best option. This is ofcourse, provided you are happy with the policy terms and services.

The second best option would be to compare available options of Super Top-up with option of Additional Mediclaim Policy. If the premium is more or less the same, we would recommend additional policy more than a Super Top-up.

After all the above options, look for the option of a simple top-up to increase your cover. Be sure you are aware of the fact, that this option is more useful in the very long term (6-10 years), since it will trigger only when your one claim goes above the threshold/deductible mentioned in the policy.

Other Important points when you plan for upgrading health insurance

1. Upgrade deadline

If you observe around you, lifestyle ailments are spreading like an epidemic across India, thanks to the sedentary lifestyle we live.

You will observe that most of the ailments start cropping up in the late 30’s or early 40’s. If you/your family are in your early 30’s and already have health issues (overweight, underweight, breathlessness, borderline high cholesterol etc.) it is recommended that you go for the highest coverage on mediclaim immediately, rather than get a restricted cover in case you suffer from a chronic ailment in the interim of your plan to increase coverage.

In any case, ensure you upgrade to desired coverage by the time you reach the age of 40 years.

2. Option of stepping up your upgrade plan

If you are in your early 30s, and you cannot afford a one-shot upgrade is too heavy on your current financial budget, create an upgrade plan. Spread the desired upgrade amount across your age upto 40 and upgrade the amount in a manner that you reach the upgraded amount by 40 years. For instance, increase your sum insured every year by say Rs.1 Lakh.

3. Upgrading Features of your plan

Moving to a plan with better features. If you are happy with the sum insured, but not with the features (limitations like room rent limits or co-pays etc. or maybe the network of hospitals) and you are looking at an upgrade, you need to first look at the same insurance company, and check whether they have an advanced plan you are looking for.

In case you like a plan from another Insurance company, you would have to opt for portability with this new Insurance Company 45 days before renewal of your existing policy. Do remember, in the real world (outside the IRDA guidelines) there are limitations on who can get portability, especially if your family is older than 45 years, has a claim history, or a chronic disease.

Go for any options you like above, the bottom line remains – TAKE ACTION. TAKE ACTION NOW. You have too many priorities in your life at home and work, to really be able to remember and act on this even tomorrow.

This article is from Mahavir Chopra of Medimanage. This article first appeared on medimanage blog

Why you should stop looking at ‘Past Performance’ in Mutual Funds

Posted on by Jagoinvestor

One day, a calf needed to cross a forest in order to return to its pasture. No one before this had ever ventured in to the forest. Without any rational, it forged out a long and difficult path full of bends, uneven ground and steep climbs. The next day, a dog took the same path following the calf’s footprints and a flock of sheep followed. As the path started taking some sort of visible shape, men started using the same and gradually, it became a well defined, accepted and the only way to cross the forest.

After many years, the trail became the main road to the village. Everyone complained about the traffic, cursed the long distance and treacherous turns, up and down hills but never thought of a better alternative. The old and wise forest smiled at how men tend to easily accept the way already open, without ever questioning whether it’s really the best choice.

In the same way, if you look at, the mutual funds’ investors. They seem trapped in a similar kind of concept called as – The Past Performance.

past performance not correct way of predection

Past Performance as selection Criteria

Since quite some time, Past Performance has become a major criterion if not the Holy Grail of the mutual fund selection system. In fact, one of the leading business magazines in association with one of the leading rating agencies went ahead and mentioned “We take into account a much longer period for mutual fund evaluation as that can serve as a serious guide to future performance”… (Their long term means 3 years in this particular case and they used return and risk adjusted  numbers for analysis)

Further, rather than challenging the concept, there has been a continuous debate if investors should look at 1-3 year performance or a longer period like 5 years to make mutual fund selections. The treacherous path to the village is already created.

Proponents of the long-history case argue that a long term analysis ensures that the performance is analyzed over various market cycles and if the fund has done well across the long term horizon, it stands a good chance to do so in future.

Sounds logical. Is it really?

I wanted to examine if it really works. For me and for others like me who would like to know the truth and may be many more whose investments have been in red, thanks to these ratings. I gathered historical data of equity mutual fund schemes and worked out the numbers. (3rd chapter of my first book also has same kind of data)

The results were startling !

The core of the finding is “Past performance hardly relates to future returns”… and here we are, pumping our hard earned money into mutual funds, depending  on these ratings that rely heavily on the past returns generated.

Analysis Details

  • The top 5 schemes by their 1yr, 2 yr, 3yr, 4 yr and 5 yr returns were selected. Thus 5 portfolios consisting of Top 5 schemes were created.
  • The performance of these 5 portfolios was observed over the next 1 year (e.g. say for Dec-09 analysis, the return for 2010 was observed).
  • Steps 1 & 2 were repeated every quarter for the past 3 years. The objective was to establish if the relationship with past performance that exists consistently over the period of time.

Findings & Explanation

Equity mutual funds past performance

How to read this Chart ?

The graph shows 5 bars, each bar represents the average next 1 year return generated by the portfolio created on the basis of historical returns. The left most bar shows how much average return was generated by portfolio created on the basis of scheme’s past 1 year return; the second bar is the return of the portfolio created by past 2 year return and so on.

So say the analysis is done on Dec-09, the past 1 year refer to 2009 and the returns are calculated for 2010.The above graph shows aggregate returns of the analysis done every quarter.

The graph ‘suggests’ that the ranking by past 2 years is of greatest significance while the ranking by 5 years is least significant. Please note that this is just an observation and not a conclusion. Statistics is a sensitive subject and any data tortured, throws some outputs. It’s important to delve deeper and see if the outputs can be supported with reason and logic.

To validate if the inference really holds true and if it can be used for decision making, I dissected the data of all equity schemes into two parts: The Large Cap Schemes and The Mid/Small Cap schemes. The result of analysis conducted over Large and Midcap funds is presented in the charts below.

Large Cap mutual funds past performance

Mid Cap mutual funds past performance

Take that. While the large cap funds ‘seem-to-be’ driven by their past 4 year returns, the mid caps ‘seem-to-be’ to be driven by their past 2 year returns. I have consciously quoted the word ‘seem-to-be’ as I can’t find a suitable reason to defend even these findings. There aren’t actually. For anything to be considered as a general rule, it should be consistently true. I couldn’t find that when I looked at individual analysis done quarter on quarter.

If I look at each analysis done across quarters, the 2 year return is not the significant driver of future returns always. A considerable number of times the other ones (1, 3, 4, 5 yr returns) gain importance. Just like “past performance” parameter, there are many other mistakes which an investor does in his financial life, and we have decided to talk on some other aspects like those in our upcoming workshop in Mumbai on 10th March. Incase you are in Mumbai, dont miss that event.

Dont use Past Performance to Predict Future

It is quite evident that the past returns cannot be a torch bearer for investment decisions. Following the past returns as a guide or using ratings that rely heavily on past returns is like shooting at a dart board in dark. For any doubts that remain, consider this

Reliance Equity Fund was the top performer in the Large Cap category in 2012, with a return of 41%. Did you know it was the worst performer amongst Large Cap funds by historical return? i.e. if you were in Dec-11 and would have picked up this fund’s historical analysis, it was the worst performer by 1y, 2y, 3y, 4y and 5y return.

Another best performer, SBI Bluechip Fund (2012 return: 38%), never beat more than 33% of its peers ranked by past 1y, 2y, 3y, 4y and 5y return as of Dec-11. Not surprisingly, a leading mutual fund star rating agencies top picks of 2011, underperformed the index in 2012. The agency boasts of using a good mix of longer period historical return and risk adjusted performance.

In my next blog, I shall discuss what can be the reasons of looking at past performance, where did the whole thought possibly evolve and where do  things  go wrong. The views expressed above are personal and for a change, I own them. All arguments and points welcome. I really value justified facts and accept only my wife’s opinions…!!!

PS: While I finished writing this, there is a news regarding S&P being sued for damages worth USD 5 Billion for misrepresenting the credit worthiness/rating of an issuer due to conflict of interest. (https://on.mktw.net/YRehB0)

Does it sound any bells?

About the Author

Sharad Singh, a serial-entrepreneur, has spent more than 14 years in the analytics domain and has done extensive big data work in finance. He runs Valuefy, an investment portfolio analytics firm that provides portfolio management solutions to BFSI clients. Valuefy has recently launched www.theFundoo.com, a niche portal that aims to make investment decisions easy and effective for individual investors. Sharad is an engineering graduate with PGDM from IIM, Ahmedabad.

Do you use past performance as one of the criteria when you select mutual funds ?

Example of mis-leading financial product advertisement

Posted on by Jagoinvestor

Does False and Misleading Advertisements come under the heading of “Mis-Selling” ? Have you ever saw a financial product advertisement where numbers are tweaked and framed in such a way, that the financial product looks very attractive and not-to-miss deal ?

You see the advertisement and nothing looks wrong to you and you just concentrate on numbers like 15% or 17.45%, as advertised ! . What about mis-selling by big financial institutions who are considered to be too-big-to-fail?

I came across the following advertisement (printed here only partly) in several media including the Company’s website.  Even before that, one of our investors, was also flummoxed by the high yield indicated and asked us to explain how it is possible?

Well, a bit of creativity and lot of embellishment seems to have achieved the desired results.

Below is the snap shot of that advertisement which shows the amazing effective yield of the product.

SBI-Fixed-Deposit-advertisement

This advertisement in question is about a 5-year deposit from one of the biggest PSU banks in India, which is also eligible for exemption under section 80C of Income tax act. No wonder, tax saving season has just arrived!.

Tax Saving Fixed Deposits, lets you invest a certain amount, on which you will receive tax exemption subject to maximum of Rs.1 Lakh.  This would translate to reduction in your tax out go, depending on the tax bracket in which you will fall under – it may be either 10% or 20% or 30% and the cess applicable thereon.

A simple and straightforward situation.

Since it is a bank deposit, it is perceived to be safe.  There is an additional layer of safety, because the bank in question may be bracketed under the category of government owned (major share) and it is too-big-to-fail.

What is the problem with this advertisement?

There are so many of these kind of advertisements, enticing you to invest in them because it is the tax planning season.  In your interest, if there is little bit of embellishment of the numbers what is wrong with that?

Anyway, you need to be ‘sold’ something, otherwise you will end up paying lot of tax to the same Govt. Instead, just listen to the advertiser and put the moolah where the message belongs to.

At this juncture, let me make it clear the meaning of mis-selling and quote from one of the recent regulations by SEBI Securities Exchange Board of India.

For the purpose of this clause, “mis-selling” means sale of units of a mutual fund scheme by any person, directly or indirectly, by –

a) making a false or misleading statement, or
b) concealing or omitting material facts of the scheme, or
c) concealing the associated risk factors of the scheme, or
d) not taking reasonable care to ensure suitability of the scheme to the buyer.”

If we go by this definition of mis-selling, let us see where does the subject advertisement stands.

1. The advertisement does seem to make a false or misleading statement. While calculating the effective yield at 16.64% or 17.39%, it does not adjust the effective yield for income tax. Even though it says the return is pre-tax, it just stops there.

Why is it important to adjust the return to taxation?  Because to arrive at Effective Annual Yield, it has assumed that the investor falls in the category of 30% marginal tax rate and hence he or she is eligible for “B. Immediate Tax Savings” of Rs.3,090/- which is 30% + 3% Cess thereon on Rs.10,000/- deposit.

When such being the case, how the advertisement can conveniently ignore the taxation on the interest income? Interest on bank deposits is taxable as “Income from other sources” either on cash/receipt basis or on accrual basis depending on the method of accounting followed by the investor.

It is a convenient forgetfulness on the part of the advertiser.

2. The advertisement appears to attempt concealing or omitting material fact such as taxability of interest income earned by the investor.  It has also not highlighted the tax deduction at source applicability in case the interest income is beyond a certain threshold.

3. The advertisement (in its full form) also has not highlighted the risk factor of possible default or delay in payment of interest in time and the capital.  Since bank deposits need no rating, no one bothers about the underlying risks.

4. The advertisement (in its full form) does not highlight the suitability of the scheme to the buyer.  It brings in to its fold all investors under the category “Others”.

Therefore, it fails by all the four counts that are applicable for lesser mortals, such as mutual fund manufacturers and advisers.  Of course, you can not apply one regulator’s dictum on others in letter; what about the spirit? Just because RBI is the regulators for bank, should bank not follow what is in interest of investors ?

What about Bank Social responsibility ?

What would be the state of mind of the investor, when she sees such a highly enticing advertisement?  In the absence of a super-regulator or dialogue between various regulators, different regulators seem to have different yardsticks about mis-selling or mis-representation. But who cares as long as it is a big govt. owned entity?

It used to be the same case when govt was running a mutual fund business from early 1960s till late 1990s.  The mutual fund scheme was also guaranteed by the Govt (remember UTI), was eligible for tax exemption and the fund house was considered to be too-big-to-fail in its time, even though such a coinage was not fashionable in that period.

Finally the mutual fund business did collapse under its own weight and thousands of investors lost their hard earned money.  Even though the government stepped in to arrest a free fall, the sheen of guarantee was lost.  No lesson seems to have been learned from then to now.

What is the actual situation therefore in the present instance?

Below are the various possible scenarios:

SBI Fixed Deposit Returns tweaked to fool and mislead investors

As you can see the effective annual yield in all the above scenarios is nowhere near the one mentioned in the advertisement the moment you take in to account the taxability of the interest income.

How many of the investors who are already in the marginal tax bracket of 30% would have the limit left to invest in this fixed deposit scheme and also would be able to receive tax exempt interest income?

They will be definitely in minority or possibly no one would meet both the conditions at the same time.  What can one say about the tactics of highlighting a scenario applicable in minority cases to all investors?

Misleading or partially true advertisements

Why should you as an investor and we as financial planners be worried about such misleading advertisements?  Are we not immune to such misleading illustrations by many of the financial products manufacturers already?

In fact recently the Finance Minister of the country mildly chided one type of financial product manufacturer not to mis-sell the products.  He attributed the consistent fall in the market share of such a product to the past sales practices.

Herein lies the crux of the problem that investors are floating in a sea of distrust and when very big names keep publishing such misleading or partially true advertisements,  the distrust would keep growing and that is not good for the saver or investor and in turn to the economy.

Already some of the insurance products and mutual funds have become the victims of mis-selling, perceived or otherwise. I am really surprised that such a big institution is indulging in a highly embellished communication of doubtful veracity when there is no need for such gimmicks.  I am also worried because I and my family have our banking relationship with this too-big-to-fail entity.

About the Author – The article is written by Narendra N Kondajji, A bangalore based CERTIFIED FINANCIAL PLANNERCM (CFP) . His website is  www.procyonfp.com and this article was originally appeared on his blog here

Credit Card Reward Points & Cash Back Comparison – Unearthed

Posted on by Jagoinvestor

Do you know which is the best credit card in India in terms of rewards points which you can redeem at different categories ? Have you ever wondered how different or close these credit card reward points are ? Let me take an example!

Ever thought the difference between how does 5X rewards from Standard Chartered differ from 10X rewards from Amex, ever wondered whether taking a 5% cash back is better than going for 10X rewards. Ever thought how can you save in excess of 16K per annum only by having a few cards in your wallet, well continue reading.

credit cards reward points in India

Every credit card company offers rewards in the form of Cashback / Reward Points to its customers. These rewards are funded by what is called as interchange. Interchange is transaction fees charged by the bank from the merchant. Its usually 2 – 3 % of every transaction. This is the reason, why some merchants ask an excess 2% if you tell them you would be swiping your card instead of paying them in cash (Read some must know points about your credit card).  Cash is the preferred mode for another reason and that is to save taxes, as every credit card transaction goes into the books of the merchant, but that’s a separate discussion and we’ll leave it to some other day.

A few disclaimers before I proceed. This article is about rewards points and how you can save maximum through credit cards. “A rupee earned is a rupee that earned 6 percent” – So lets save some money for all of you. Again the entire article has been based on my experience and research, so am open to suggestions and feedback. Also I haven’t included Airlines spend, as I still don’t fully understand the Points to Miles conversion for different Airlines.

Following are some of the points that I hope the readers will have a much better understanding of, by the end of the article.

  • Comparing Credit cards by their rewards proposition – If you have multiple credit cards, how to figure which one has a better reward structure?
  • Accelerated Rewards: Most of the credit cards have an accelerated reward structure. So how should that impact your spending pattern so as to maximize the rewards?
  • Wallet of Credit cards that one should own – Using the methodology explained above, this would be a list of credit cards that will help maximize your savings.

Credit Card Reward Points & Cash Back Benefits

Lets start of with , How should one go about comparing credit cards by their rewards proposition.  To understand this, there are two important concepts that one should be aware of

  • Earn Rate:  Earn Rate is number of points earned per amount spent.
  • Burn Rate:  Burn Rate is the Rupee value of a reward point.

For Example – For a HDFC Silver/Gold card, you earn 1 reward point for Rs. 150 spent, so the earn rate is 1/150. Whereas each credit card reward point of a silver/gold card is worth 15 paise or Rs 0.15 only. So the burn rate is 15 Paise. You multiply the two and you will get a metric which you can use to compare credit cards from different companies.

Using the Burn Rate and the Earn Rate, I have come out with a very simple metric  “Rupee earned per every Rs. 100 Spent” , which can be used to compare some of the top credit cards in the market.

Rupee earned per every Rs. 100 spent = Earn Rate (Calculated on Rs. 100 Spent) * Burn Rate

Also the comparisons below are based on the basic earnings. Most of the cards have an accelerated reward-earning proposition. We shall factor that when we calculate the monthly earnings from different spend scenarios. Also will show you how to create your own savings through your own spend numbers.

Example – 1

I will give you an example of how this metric would be useful to differentiate between two cards of the same bank or different cards across the bank.

hdfc credit card reward points

The above tables give us an idea of hdfc credit card reward points benefits in the market. If you look at the value proposition of different cards, they are vastly different in terms of Rupee Earned per Rs. 100 spent. Rs.100 spent on a HDFC silver/gold card will give you Rs. 0.10 whereas spending the same amount on Regalia will give you a Rs. 1.08 in terms of reward points. But again Regalia and Infinia are fee based cards and hence one needs to factor this in when computing the relative reward proposition of the card.

Example – 2

Now lets compare HDFC reward points with CITIBANK rewards points

hdfc vs citibank credit card reward points

If we compare the same metric Rupee Earned per Rs. 100 spent, Platinum and Ultima cards are decent options and in the premium segment HDFC provides better rewards.

Accelerated Rewards – Categories of Spend and Best card in each category

Apart from the basic reward proposition that’s present with every credit card, most of the cards in the market offer an accelerated rewards earning proposition. These accelerated rewards can be in a variety of forms. E.g. 5x rewards on Departmental Stores, 10X rewards on Online spends or a 5% cashback on Departmental Stores.

Now lets use the concept above and factor in the accelerated rewards propositions, (That some of these cards offer) to get to the best cards in each of the spend categories. The formula to calculate the rewards is a simple one: Just multiply the basic rewards earned above by the accelerated reward earning multiple.

Formula

Rewards Earned = (Rupee Earned per Rs. 100 Spent) * (Accelerated Reward Earning multiple)*Spend/100

Example – Rewards earned if you have spent Rs. 2000 on Citibank Rewards card.

  • For Citibank Rewards, Rupee Earned per Rs. 100 spent = Rs. 0.4
  • Accelerated Reward Earning : 10X on Departmental Stores
  • Rewards Earned = 10*0.4*2000/100 = Rs. 80

A few disclaimers here:

  • A few credit card companies even though offer accelerated rewards proposition but offer it only on select merchants. For e.g. Amex offer 10X rewards on its partner merchants, CITI rewards card offers it on select merchants, etc.. If you do not shop on these merchants then you won’t be earning any accelerated rewards. That’s the reason I prefer credit cards which offer a flat accelerated rewards structure so that I get the freedom of shopping wherever I want to
  • Also some of these accelerated rewards have a validity, which means have an expiry date. You are eligible for accelerated rewards only in that period.
  • Also I have a preference for Cash back as compared to reward accumulation, reason being two fold. First: Cashback impact my outflows directly as compared to rewards (where one has to go through the process of reward redemption and its benefits). Second: Its faster.

Keeping the above in mind, lets factor in the accelerated rewards to the basic rewards proposition of credit cards and figure out which card will give you the maximum advantage. Also the following will give you a chance to rate your card with respect to the cards available in the market.

The data has been collected from the sites and catalogues of different credit card companies. Since the accelerated rewards are mostly provided in specific categories, so we shall consider each category separately and figure the best card in that category.

Credit card reward points apparel

Winner – Manhattan Platinum Card

Even though it seems, owning a Citibank Rewards card will give you, Rs. 80 cash back, but that’s just superficial because the 5X rewards on Citibank card is limited to only a few stores. Lifestyle being the major one of them.For Manhattan Platinum card, even though the offer tells only about Departmental stores, it covers all kinds of retail spends. Spends in malls are covered by this offer

Credit card reward points stores

Winner – Manhattan Platinum

Again it’s a straight fight between Manhattan Platinum and Citibank Rewards. And Manhattan Platinum wins hands down.

Credit card reward points dining

Winner – Kotak Trump Card

Clearly Kotak Trump card is the clear winner. With you saving almost Rs. 600 per month if you are a heavy diner. There are a few finer points, that the total spends on Movies and Restaurants should be more than Rs. 4000. There are a few other cards, where the card issuing companies have a tie up with specific restaurants in different cities. Citibank being one of them where they have tied up with more than 200 merchants across India and offer a 20 % discount flat.

Credit card reward points fuel

Winner – Standard Chartered Titanium

Standard Chartered Platinum Rewards, Standard Chartered Titanium, IOC Titanium and ICICI Bank HPCL card are quite close in terms of the monthly earnings. But I like cashback more than earnings through reward points. Also the 5% flat cashback on any petrol pump as compared to IOC and HPCL for Citibank and ICICI bank cards respectively make Standard Chartered Card a winner in this category.

Credit card reward points movies

Winner – Standard Chartered Titanium

Standard Chartered Platinum Rewards, Standard Chartered Titanium, IOC Titanium and ICICI Bank HPCL card are quite close in terms of the monthly earnings. But I like cashback more than earnings through reward points. Also the 5% flat cashback on any petrol pump as compared to IOC and HPCL for Citibank and ICICI bank cards respectively make Standard Chartered Card a winner in this category.

Credit card reward points utility bills

Winner – Standard Chartered Titanium Card

Again , both the cards are equally good, but the additional condition of paying your bills via Citibank billpay turns my preference towards Standard Chartered Titanium card.

Carrying a similar analysis on categories of Movies and Entertainment and Utility Bills reveals that Kotak Trump card and Standard Chartered Titanium card emerge as the top card in the respective categories.

Wallet of Credit cards that one should own

Having done the hard bit of analysis, calculations and comparisons we come to the easier bit of creating a wallet of credit cards for you which will accelerate the reward earning and help you save a substantial amount over a period of time. To give you all an idea about savings that can be done by having this wallet, I have created a few scenarios and the respective savings.  One can create his/her own spend/rewards scenarios using the table below.

 

Category of Spend Name of the Card Value Proposition Monthly Spend Monthly Savings Annual Savings
Apparel Standard Chartered – Manhattan Platinum 5% Cash Back on All Departmental Stores Spend, (This includes all kinds of Retail Spends) 2,000 100 1,200
Departmental Stores Standard Chartered – Manhattan Platinum 5% Cash Back on All Departmental Stores Spend, (This includes all kinds of Retail Spends)  4,000  200  2,400
Dining Kotak Trump Card 10% Cashback on all Restaurants, 10% cashback on all restaurants  5,000  600  7,200
Fuel Standard Chartered – Titanium Card 5 % Cashback on Fuel/Telecom/Other Utility Bills  5,000  125  1,500
Movies and Entertainment Kotak Trump Card 10% Cashback on all Restaurants, 10% cashback on all restaurants  2,000  200  2,400
Utility Bills Standard Chartered – Titanium Card 5 % Cashback on Telecom/Other Utility Bills  3,500  175  2,100
 21,500  1,400  16,800

 

This is a guest post by Gaurav Thakur, who is currently working as an analyst with a mutual fund company. An IIT Kanpur alumnus, he has primarily worked in the financial services industry, working with Citibank India Credit cards for a couple of years and also spending time in Citibank’s personal loans division.” This article has appeared first on gaurav blog here.

Which credit card you have already and are you satisfied with your credit card reward points and cash back benefits ? Did you get any insights from this article on credit card rewards points ?

Sheconomy – The Wise Women Investor (TV Show by DSP BlackRock)

Posted on by Jagoinvestor

DSP Blackrock Mutual Funds have started a Women Financial Literacy called – Sheconomy , which is a TV initiative under their Winvestor program in association with CNBC TV 18. The aim of the initiative is to guide independent women to adopt wealth creation strategies by answering their queries on personal finance and helps them become informed investors.

Sheconomy - A women financial literacy Initiative

The show launched on 12th Jan 2013 with a panel discussion featuring a prominent matrimonial lawyer and a female psychologist who passionately believe that women must take care of their own finances. This is followed by seven episodes with various clusters of women such as homemakers, women entrepreneurs, working women, young mothers, senior citizens, fresh graduates and even a special episode with men and women talking to our Winvisors who answer queries and provide investment advice. The last episode would also be a panel discussion with some prominent women who passionately believe in the idea, share their views and experiences and talk about why they feel women need to be in charge of their own financial future.

The show airs every Saturday at 6 pm and is repeated at 4 pm on Sunday on CNBC TV 18. All the women investors should watch these shows if they want to learn more about personal finance and managing money. We feel women investors can greatly inspire other women investors. Three episodes are already aired, if you have missed them, you can watch them below .

Episode 1

Episode 2

Episode 3

Below are the names and schedule of all the 7 episodes of the Sheconomy initiative.

Episode Structure

Name of Show Show Timings Importance
Homemakers 19th Jan’13, Saturday at 6 p.m. A homemaker plays an equally important role in her husband’s financial success as well as her own. Though this cluster of women don’t typically take up jobs, investing the money their husbands allocate to them for personal expenditure could prove to be of great help in time of need.
Women Entrepreneurs 26th Jan’13, Saturday at 6 p.m Apart from all the investments which other women do, this cluster of women has another investment priority in their life ‘Their business’. It becomes imperative for them to invest in instruments that is not only safe but also provide the quickest returns so that money earned could be deployed into their business from time to time. Investments needs of women belonging to this cluster tend to be more dynamic than the rest
Working Women (Unmarried/ married) 2nd Feb’13, Saturday at 6 p.m. Women in this cluster have the highest disposable income and the least responsibilities hence providing ample scope and capital for planning investments. The married women of today has come of age from being the typical housewife, in fact getting married is the beginning of various responsibilities that a woman needs to share  with her better half at all times- Planning a baby, Bigger house, Better lifestyle, Retirement plan, monthly family budgeting, aging in laws and parents. There is an entire menu to choose from.
Young Mothers 9th Feb’13, Saturday at 6 p.m. Mothering calls for the best in women. With this emotion in mind a lot of young mothers have various aspirations for their kids; these aspirations come at price which one needs to be prepared for well in advance. A good investment made from the beginning can help young mothers to provide their children the best and fulfill all their dreams, even if you are a single parent.
Senior Citizens 16th Feb’13, Saturday at 6 p.m The life expectancy of women is higher than men So, the amount of retirement savings for women should also be higher. Statistics show that, on an average, women live 5 years longer than men, earn 25 percent less during their life time and work 11 years less in their careers and not many women are even aware enough of all of this. All these factors put together make this cluster of women extremely important to address when it comes to financial planning.
On ground forum with Men Date yet to be finalized A forum with the modern man on why he should encourage and empower the women in his life to take their own financial decisions. An educative forum for men that will teach them the upsides of their women being financial independent.
Fresh College graduates/ post graduates Date yet to be finalized Catch them young and make them grow a quote completely apt for youngsters who are about to plunge into their first corporate job. The need to understand basic money management skills such as living within a budget and handling credit and debt can lead to a solid financial foundation that in turn can lead to a lifetime of financial success.


What do you feel about these kind of initiatives ? We have also done a women centric 2 video series for our wealth members, incase you are already a member you can watch the series here .

Jagoinvestor Workshop in Mumbai – 10th Mar (Sunday)

Posted on by Jagoinvestor

We are conducting our next workshop in Mumbai on 10th Mar 2013 (Sunday). We call the workshop as “Design your financial life” . The whole idea of the workshop is to go beyond the numbers and products and talk about the real issues which can take your financial life to next level. In this workshop you will spend an entire day enhancing your thinking level and exploring the full potential of your financial life. There will be lot of interactions, some exercises and powerful conversations which will give your financial life a new shape. We have conducted same workshops in Pune, Bangalore and Lavasa till date and will be doing it in other cities soon. Below are some of the past participants testimonials

Register for the Workshop in Mumbai – 10th Mar

City Mumbai
Date 10th Mar, 2013
Where Hotel Tunga International, Andheri (East), Mumbai
Fees Rs 3,500
Registration Link Click Here
Go to Workshop Page Click Here

Note : Registration will stop before 1 week


View Larger Map

We are going to have only 1 event in each city each year. So if you wanted to attend these workshops, this is the best time to register for it. There are limited seats and huge demand from Mumbai readers for this workshop, so book your seats as soon as possible. We want to encourage financial literacy among women and for that reason, we have also discounted the pricing for couples. We really want husband and wife to attend the event together, which will make sure they are both clear about their financial life and how they need to design it in future. We have kept the tickets pricing in such a way that its affordable to most of the people. The event is at Hotel Tunga International, which is at Andheri East and being Sunday it would not be much issue travelling.

We really want these event to be your event and not just a jagoinvestor event. Its an opportunity to spend a full day dedicated to your financial life. We really encourage people to take those 10 hours for out of 1 full year and just focus on how you want to shape your financial life for future. There will be lot of sharing’s , conversations on money and some exercise’s which will really help you get a deep insights in the area of personal finance.It might be the case that you are interested in this workshop but not registering right now , in that case just let us know that you are interested and still thinking.

My Second Book – “How to be your own Financial Planner in 10 Steps”

Posted on by Jagoinvestor

I am happy to share this news with you all, that my 2nd book is going to release in next few weeks, whose title is “How to be Your Own Financial Planner in 10 Steps” . The book is published by CNBC 18. The book is now ready for pre-order, so you can order it now, it will be delivered to you as soon as it hits the stores which will happen in just few more days.

How to be your own Financial Planner in 10 - Financial Planning Book in India
Pre order Book

About the Book

By the time you complete this book, your financial life will have taken new shape!. You will have worked on 10 different areas of your financial life, in the same way a certified financial planner works with you. The book has the ability to guide you on how to plan the 10 most important areas of your financial life. There are two types of investors in India, those who plan their financial life and those who plan nothing and just let their financial live move with the flow. The second group is extremely large, and this book is targeted at this group.

Many investors who are DIY (Do It Yourself) investors can use this book to plan their financial life and be their own financial planners at some basic level. The book has the 3 elements of education, planning and action items all packed into one. Written for the common person, in simple language, the book deals with the most important financial worries and questions.

What are you waiting for ?

Anyone who feels that he can do his own financial planning and with a little support and direction he/she can plan his financial life, then one should buy this book. There are 10 chapters which cover 10 different areas of your financial life and helps you understand those areas, what you need to do about it, how you should mess it up and guides you to plan it out in simple and easy language. Each chapter has action oriented exercise at the end of each chapter, so while you go through each chapter, you will keep on making your action item list and finally complete things. I would say grab the book today, because this is the best it can be. If you need external support, you can always go for our online financial advisory services.

UPDATE – First Book Name is Changed

I have one more news to share. My first book “Jagoinvestor – Change your relationship with money” was a great success. However we are changing its name to “16 personal finance principles every investor should know” to make sure that the name of the book reflects what the book is all about. The book content is exactly same, just the name is changed now. So its now in new avatar.

16 personal finance principles every investor should know Financial Planning Book in India - Personal Finance Book in India
Pre order Book

Thanks for your love and support, because of this awesome community, it was possible to give shape to these 2 books. While the first book is more on the principles of personal finance which every investor should know, the second book is all about planning and taking action. I would be waiting for your reviews about the book.

Days Past Due (DPD) section – What is the meaning in CIBIL Report ?

Posted on by Jagoinvestor

You might have seen a section in your Cibil Report which says DPD (Days Past Due). While Loan Status and Credit Score matter a lot when it comes to getting a loan approved or rejected, a big myth among people is that a clear report (without SETTLED or WRITTEN OFF status) and a credit score above 750/800 are the only two things that they need to get a loan.
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That’s not true. While a clean report and a good score are definitely primary level requirements for getting a loan approved, there are finer details which a bank looks at, before deciding if they want to give you a loan or not; and Days Past Due or DPD is one of those important metrics. Lets understand this then …

What is Days Past Due (DPD) on a CIBIL report ?

Days Past due or DPD means, that for any given month, how many months worth of payment is unpaid. And this information is for each account . Which means that if you have 3 different loans going on, then you will have DPD information for each of those accounts. For each account you can see Days past due information for each month for the last 3 years , i.e., 36 months.

You might already be aware that your cibil report contains the past 36 months of your credit information. Each and every month, your lender who is a member of CIBIL, will update the CIBIL with the latest information like Did you pay on time or not? How much outstanding loan do you have at that moment? How many months worth of loan is remaining and other micro details are shared on monthly basis by banks and lender to CIBIL. So each month, a new month’s data is added and the oldest month (36th month) is removed from the cibil report and this way a sliding window of 36 months data is available on your cibil report at any given point of time.

Example – Date 06-12 and DPD value is 90

If DPD value is 90 for a date say 06-12, it means in June 2012, the payment is due for last 90 days, which means 3 months dues! So you can now understand the the DPD in the last month (May 2012) would be 60 and for Apr 2012 would be 30.

When you default on any payment or do not make the full payment, this DPD value will start getting a number and it will be a negative thing. So if there is a cheque bounced from your side and the loan not paid on time, you can expect one entry of DPD for the latest month with value 30 – which says one month of dues are not paid. If you clear it on time before the next cycle comes, it will help you to improve your bad credit score and the DPD value for next month again will be normal, but if you do not make the payment and keep those dues , then the DPD value for the next month will increase to 60, which implies that from 2 months you have not paid the dues. See the graphic below to understand more examples of DPD

Days Past Due (DPD) example in CIBIL report

What does XXX means as DPD Value ?

There are certain values which can appear in DPD section and each of them has some meaning, however the safest values are 000 and XXX . If you have the value as 000, it means the dues are totally clear on that date and nothing is outstanding. And if the DPD value is XXX, then it simply means that bank has failed to report the data for that month to bank, and it does not impact you at all . At times instead of 000, the value can be STD which means that the dues are for less than 90 days . While any other number other than 000 is a negative thing, but make sure it does not go above 90 days , because then its super negative.

At times, some lenders also report DPD values in a different way, as per asset classification norms set by RBI. In that case, the values which appear under Days Past Due section are STD , SUB , DBT or LSS which denotes good to bad , where STD is good and LSS is the worst one. Here is what each of them denotes

 

STD (Standard) Payments are being made within 90 days. Note that any delay of more than 90 days is seen as Non Performing Assets (NPA) by banks
SUB (Sub – Standard) An Account which has remained NPA for upto 12 months
DBT (Doubt ful) The Account which has remained Sub Standard Account for a period of 12 months
LSS (Loss) An account where loss has been identified and remains uncollectible

 

Can DPD values be changed ?

There have been cases that lenders have rejected loan applications based on DPD information even though the credit report was clean and the score was quite good. And the common worry at the time is “Can’t I change my DPD information somehow?” and the answer is NO . You can’t change DPD information like you can change SETTLED or WRITTEN OFF status by taking some action. All you need to do is wait for some time and as time passes, new month information will get added to your report and old data will keep getting phased out. So if you have some bad DPD data before 12 months, then it will go out in next 24 months, and if you have some DPD data 2.5 years old, it will go out in 6 months period.

For those who like to learn through video’s, we have a 40 min course on Credit Report and Scores in detail on our Jagoinvestor Wealth Club, which will explain all the aspects of the subject in a clear manner and great detail

Did you understand the meaning of Days past due or DPD which appears in CIR (Cibil Report) ?

Why Women dont ask for their Share in Inherited Property and Wealth ?

Posted on by Jagoinvestor

Let’s talk about Women and Inheritance today. Our Indian culture, has for thousands of years treated men as someone who lead families and be the heads of next generation and women as someone who will go to some other family after marriage and start a new life. This has been deeply rooted in all our minds for years and years. This is one big reason why women in India are not aware about inheritance laws and their rights in property.

Women and Inheritance in India

Some families, where there are sons and daughters both, do not even raise the point of dividing the property equally among all of them equally. Daughters who are married are not even in picture at the times, the wealth is divided and it’s considered  natural and something that makes sense. Women on the other hand also do not take any lead or don’t bother asking for their fair share in the family wealth.

Brothers do not share wealth with Sisters

You must have seen cases like these and might be experiencing them in your family as well.

Case 1 : I know a family which had 1 brother and 3 sisters and who had a huge property in Mumbai at a central location, lots of shares, mutual funds and bank accounts, When the father died, people cried and after a month every body was back at home, all 3 daughters who are married didn’t even think for a second that they have a huge 25% share in the wealth, which is a decent amount by today’s standards. All 3 daughters are not so well off  and struggling day in and day out, but they are just not considering the option to ask for their share. Legally if they want, it would be just a matter of a  few months or years and some bitter experiences, but they might reach their financial freedom if they go to court. But they are too emotional to take that step and worry about relationships and the problems which arise out of it.

Case 2 : In another case, there are 2 brothers and 2 sisters (all married), and after the father’s death, the brothers are fighting with each other for property “Father spend so much on your education, my career was affected because of that, So I should logically get more now.” Fair point logically, but from legal point of view, it does not matter much how father treated whom . The sad part of this story is that brothers are fighting for their share and also sharing their plight with their sisters, but not for a second do they think that even sisters are legal heirs and should also get their share. (Incase you didnt knew – Hindu Succession Law is applied when a WILL is not written)

It’s not Fair!

Just because now they are part of another family, they are not seen as valid heirs. I am raising this point today because this is wrong practice. Women now have to raise their voices and ask for their share from their parents and brothers. If required, ask for it legally. Just because father has spend lot of money on wedding of sister and given her gold does not mean she can be cut off from the family wealth sharing.

If father writes a WILL saying that he wants to give his wealth in some specific proportion, then it’s fine, it’s your father wish. But if a WILL is not present, then you are a valid legal heir, you should ask for your share and you will get it.

Look at it as part of your Financial Plan

If you are a man, your wife might be entitled for her share of wealth from her parents’. In today’s world where money has become so important, see if you can convince her to ask for her share. It might get her valid share of money and can help you in leading a better financial life. I am not saying this because you should be money minded, but because its a fair thing to ask for.

We have created a 2 part video program for Women and Money for our wealth club members. If you are a member there, please show this video series to your spouse.

Do you have any personal experience like this? Can you share?

How you CHOOSE to mess your financial life and never realise !

Posted on by Jagoinvestor

Do you make a choice or take decisions in your financial life ? A lot of people have not taken lots of important actions in their financial life, which they should have taken long back!. You have to understand that you are making a choice by not taking those actions. When you take some action or do not take an action, deep down you are actually making a choice in your financial life, which we will see now.

decision-vs-choices-in-financial-life

Let me give you some examples

1. Buying Endowment & Moneyback Policies

Most of the people who take the decision of buying endowment and moneyback insurance policies , they say that they are buying it because they trust the company and want safe returns. Now that’s their decision, however they have to be understand that deep down they are making some choices which are unspoken …

  • They are choosing to get below inflation returns on their investments
  • They are choosing to put money in something which is illiquid and might not help them in emergencies
  • They are choosing not to cover their family with a higher life cover

2. Not buying a Term Plan

“I don’t think I will die” or “It does not give back money at the end” – this is the general reasoning behind not taking a term insurance plan by many people. Now, again, it’s their decision based on their belief, but deep down they are making some choices which are

  • They are choosing a life of struggle for their family, in case they are no more in this world
  • They are choosing to pass on all the debt and tension to their spouse and children in future
  • They are choosing that their children and family might not lead a great comfortable life in future if they are not around.

3. Not buying Health Insurance

“I will take is next month” and “I drive carefully and I am healthy , so I don’t need it” are the top most reasons given by those who avoid taking health insurance. Again, they feel it’s a right decision and I am not commenting if it’s right or wrong, but surely they are choosing few things in their life and for their family …

  • They are choosing a situation where their entire wealth accumulated till date, might wipe out in health related expenses someday
  • They are choosing to get into a situation where they might have to run around for money to fund health related expenses
  • They are choosing to constantly worry about big ticket health related expenses if any

4. Not creating a WILL

It’s a decision taken by almost all of us. “We are still young”, “I will do it once my net-worth is at least 1 crore” etc., are the common reasons behind not making a WILL. However deep down you are making few choices and you have to accept them …

  • You are choosing a lot of frustration, chaos and running around for your legal heirs
  • You are choosing, that your family will have to meet lawyers, go to courts and spend lots of money and effort to get what they deserve
  • You are choosing to create a confusing situation, where your legal heirs fight with each other and try to justify who deserves what

5. Not hiring a Financial Planner (when you really need it)

“I can do it myself, I was a bright student all my life”, “They charge a lot for what they do”, are some of the reasons given by investors for not hiring a financial planner for themselves. It’s their decision based on their beliefs, but deep down you are making some choices …

  • You are choosing to still do trial and error and play with your financial life
  • You are choosing to not organize your self and get into a dedicated structure which can improve your financial life
  • You are choosing to focus on what you will spend rather than what you will get out of the whole exercise.
  • You are choosing to delay your actions and rely on yourself for taking actions and get disciplined which most  fails most of the times

6. Over spending right now like there is no tomorrow

“Life happens NOW”, “If I don’t spend, whats the point of earning well”, “I will earn more in future, let me enjoy today” – These are the top most things you will hear people saying who over spend (more than they should). One can comment easily if it’s right or wrong, but let’s not get into it, it’s their decision and there is nothing wrong in it, just that these people need to understand the choices they are making without realizing them

  • They are choosing to have a struggling financial life in future in case tomorrow does not turn out to be like what they imagined
  • They are choosing to have a better today at the cost of tomorrow
  • They are choosing to be working for more years in future, because they will not have wealth when they are old.
  • They are choosing to have a less comfortable life later in life, when responsibilities increase and opportunities decrease

Conclusion

At the end of the day, you always choose something in your life out of the decision you make. This is true for all the aspects of life, including your financial life. So understand that you are fully responsible for what you get.

Can you share your story in short and share what choices have you made in your financial life ?