You can easily avoid paying a bomb in bank charges

Here are a few quick ideas to understand bank charges and manage your bank account.

Jun 23, 2021 08:06 IST India Infoline News Service

Recently, the RBI approved an increase in cross-ATM charges proposed by the banks. It means; when you use ATM of other banks more than thrice a month, you end up paying a much higher charge for the usage. It is estimated that in an average year, banks earn Rs4,000cr to Rs5,000cr purely from account holders not maintaining minimum balance. If you add other charges that get billed quietly to the bank account, it adds up to Rs7,500cr per year. That is a full $1 billion that account holders end up paying banks, just for not being extra careful.

Bank charges are a reality and while they may appear to be unfair, you just cannot wish it away. A better way is to understand these bank charges and manage your bank account accordingly. Here are a few quick ideas.

Maintenance of minimum balance

Banks have different definitions for average minimum balance, although the average you are expected to maintain is around Rs10,000. The bank may require you to maintain average monthly balance or average quarterly balance, depending on where the branch is located. Normally, salary accounts are exempted from these charges. The annual charges can vary from Rs200 to Rs500, depending on how much balance you maintain. This is quite simple to take care of and in the process you can save unnecessary debits to your account. These costs are exclusive of 18% GST.

Cheque books cost you too

If you thought that cheque books are free of cost, think again. Most banks allow you 25-50 cheque leaves free of cost per financial year. After that, each cheque book is charged at Rs75-100. With the rise in digital transfers, you can easily save on this cost by reducing usage of physical cheques to the bare minimum. Even demand drafts have a cost and it starts at Rs50 and escalates with the amount of DD.

Cash transactions with your bank can be expensive

This charge has become common in recent times with the government focus on digitization. It wants to discourage you from dealing too much in cash as it does not have an audit trail. Normally, banks offer 4-5 transactions of cash deposit and cash withdrawal in a month. Any cash transaction beyond that attracts charges which could range from Rs150 to Rs200 per cash transaction. Similarly, there is a limit to the cash you can withdraw from any non-home branch. In such cases, charges of Rs100-150 are applicable on a flat basis.

ATM cards are free, debit cards are not

Debit cards can also be used for routine purchases while ATM cards only dispense cash. ATM cards are free unless you have lost the ATM card and need a replacement. In that case, the banks charge Rs150-200 for replacement. However, debit cards entail a card issue cost as well as annual maintenance charge. An entry level debit card may start with an upfront cost of Rs150 and an annual fee of Rs150. The charges on premium cards increase proportionately. Wealth clients are exempted from such charges.

You will be billed for using ATMs too often

That does sound unfair, but it is a realty. Nowadays, every bank charges if you use even your bank ATM more than 5 times in a month for financial transactions. In the case of other banks, the limit is 3 times. Beyond that, ATM transactions are chargeable at around Rs15-20 per transaction. Non-financial transactions are chargeable in non-bank ATMs. If you innocently download your HDFC bank mini statement from an ICICI ATM, you would end up with a debit to your bank account.

SMS alerts cost you too

You may not realize but the excitement of receiving credit intimation by SMS also has a cost. Of course, the costs are nominal and do not exceed Rs15-20 per quarter. However, it is always safer to opt for this service.

Do digital money transfers entail charges?

There is a lot of confusion on this front. Normally, NEFT is free of charge. However, if you go to the branch and use physical form to execute NEFT, it is chargeable. On the other hand, IMPS transactions are charged at a nominal rate of Rs5 per transaction exclusive of GST charges. So, digital bank transfers are also not exactly free of cost.

Finally, ensure that mandates are honoured

This is a steep cost and can really hurt you. When the ECS mandate or direct debit mandate gets rejected, the bank charges you Rs300-350 per failed mandate. It gets worse when your cheques bounce as you get billed by the issuing bank and the recipient.

The moral of the story is that most of the bank charges can be avoided if you read the fine print. One thumb rule is to use the digital mode to the extent possible and reduce the use of cash. Of course, a bit of banking discipline can go a long way in keeping costs in check.

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