In the last decade or so, how we bank have undergone a sea change. While long queues at the bank are practically a thing of the past, now it is possible to do a host of banking transactions from our mobile phones, whether it is transferring money, opening a new Fixed Deposit (FD) and so on. With fintech changing the way we bank, banking has become easy, convenient and cost-effective. A breed of lending companies has now come up who offer ready loans to those customers that traditional banks would not lend to. With banking moving to mobile, there are also security concerns which are fuelled by the news of financial frauds. We answer some of the most common financial queries you have so that you can bank with the peace of mind.
How do I ensure security, while using digital banking?
1. Avoid making any financial transactions while you are connected to public hotspots or general Wi-Fi in hotels, airports, cafes, or other such places. Public networks are more prone to risks of data theft as their encryption can be cracked easily by hackers or crackers trying to access your information.
2. Make all financial transactions only when your mobile is safely connected to your personal internet connection that is password protected.
3. Download and use only those banking, shopping, or gaming apps that are available in the official store of your mobile platform (Google Play Store, App Store, Windows Store).
4. Always ensure that any website where you enter financial or personal information begins with “https” and not “http,” as “https” website means it uses Secure Sockets Layer for its connection, which keeps your data safe and restricts the sharing.
(Navin Chandani, Chief Business Officer (CBO), BankBazaar)
2. What is it that investors should consider before putting their money in small finance banks?
The first and most important one is that a bank’s savings account is not an investment tool. Use it only to keep surplus funds for the short term until they are invested and to keep a certain amount as emergency funds for easy access. Usually, the savings account contains approximately Rs50,000 on an average. Even a four per cent rate difference implies a difference of Rs2,000 annually.
Do not close existing savings accounts to move to small finance banks. In many cases, the account is usually a long-standing one, and has a long history of payments and receipts. It is the basis of your relationship with the bank and could even have an impact on your credit history.
3. How does one save on paying bank fees and charges?
Cash handling charges form a significant part of charges levied by the bank. While transacting from your home branch allows you higher limits, you still have to pay transaction charges, between`50-150 per transaction, if you exceed that limit. The same applies to the ATM. Several banks allow only three to five free transactions, even at their own ATMs. If you cannot do without cash, withdraw large amounts at a time to avoid paying more. Try to use online banking and UPI to minimise cash transactions and ATM withdrawals. Maintain minimum balance at all times, as not maintaining the required balance attracts non-maintenance charges. Avail premium services.
Banks normally have a premium account for its customers under which they offer upgraded services without charges. Instead of maintaining multiple accounts at different banks, you may hold a single premium account, receive premium services.
4. What is the best way to get out of credit card debt?
In the long-term, two ways to use your credit card wisely are to
1) Convert high value purchases in to EMI and
2) Pay up in full all other retail purchases at the end of each billing cycle on or before the payment due date.
On credit cards, high value transactions can be converted into EMI (Equated Monthly Installments) which are offered by banks at a lower rate versus revolving the outstanding amount by paying minimum amount due. Through EMIs on credit card, customers get an option to amortise their high ticket spend and repay the same in a disciplined manner.
(Ambuj Chandna, Senior Executive Vice President & Head – Consumer Assets, Kotak Mahindra Bank)
5. When should one invest in bank fixed deposits? How does one decide the deposit amount and tenure?
An FD is a relatively safe financial instrument offered both by banks and companies. The rates of interest on an FD are slightly higher than those in a savings bank account, and the instrument is a preferred investment for persons looking for a fixed return with relatively lesser risk.
The main reasons why a person should invest in a FD are its safety, ease of investment (both through physical and online modes), fixed returns, a wide choice of tenure and interest payments and easy liquidity.
A relatively aggressive investor would have a larger allocation in non-debt instruments, whereas a more conservative investor or a person nearing her retirement should allocate a larger portion of their investments in FDs and similar fixed maturity instruments.
(Virat Diwanji, President – Retail Liabilities & Branch Banking, Kotak Mahindra Bank)
6. What are some of the things to keep in mind to ensure mobile banking safety?
Check the Table : Security Tips for Mobile Banking
( Deepak Sharma, Chief Digital Officer, Kotak Mahindra Bank)
7. I have an average credit score. I plan to apply for a home loan two years later. What are the steps I can take to improve my credit score?
Credit score is an indicator of measuring a person’s ability to repay loan in the coming years. As you would be availing a loan 2 years from now, you need to take gradual measures over the period of time to improve the credit score. Some of the measures, which you can take, include repaying the existing dues, if any, on time. As current repayment history is one of the major indicators of credit risk and also your credit score. Other steps include avoiding multiple loans and credit facilities and avoiding several queries for loans. Further if you are using a credit card, pay the total amount due rather than the minimum amount due.
(Suresh Surana, Founder, RSM Astute Consulting)
8. When going for a home loan what should I keep in mind when choosing the tenure and EMI?
As you should be aware, Equated Monthly Installment (EMI) is the periodic installment to be paid by the borrower. Such installment would comprise of the principal amount and interest on the outstanding loan. The amount of EMI is inversely related to the tenure of the loan. Thus, a longer tenure would help in decreasing the amount of installment and vice versa. The important factor, which you should take into consideration, is that obtaining a home loan is a long-term commitment (generally 15 or 20 years) and as such you need to be sure that you do not overleverage your finances (your income source). You need to plan and separately provide for certain major events which you may need to spend on (such as marriage or education or any other medical emergency ) during the tenure of the home loan.
9. Does my credit score change when I make several loan queries? What is the best way to compare rates when I am applying for a personal loan?
Yes, the fact that a person has made several loan queries would cause a decline in the credit score. It is an indicator the person was not successful in obtaining the loan in the first go and hence made several loan queries with different banks or financial institutions. It would be prudent to verify the interest rates.
10. Should I shift to repo rate-linked home loan? How will that benefit me?
Repo rate is the rate at which commercial banks borrow money from Reserve Bank of India (RBI). Repo rate is generally used by the RBI as a measure to control inflation. In a repo rate-linked home loan, the change in the repo rate would have a simultaneous effect on the interest rates on the home loan.
The RBI changes the repo rate usually once in three months. It can change further too.
Thus, in case there is an anticipation of cut in the repo rates by RBI, it would be beneficial to avail a repo rate linked home loan.
However, a person availing such a repo rate-linked home loan should also be prepared to undertake the risk of substantial increase in the interest rates if there is a corresponding considerable increase in the repo rate by RBI.