9 Jan 2014

Bank Fees, Charges and Penalties

In this day and age almost all of us have a bank account. I have one, my husband has one, my parents have one and my domestic help has one.
We can open a savings or a salary account to deposit and withdraw money. Of course, I have to pay for a debit card and all kinds of fees and charges. Are banks doing me a favor by keeping my money? Absolutely not! I am doing the bank a favor by opening an account with them. Let us see how.

What are banks?

Banks are financial institutions which emerged to keep our money safe. They also use the money we deposit to make various investments. This is how the bank makes money i.e. a bank is making money on our money. Now the question arises; what charges are being levied on us by the bank and why?
   1. Debit Card /ATM Card Fee

Banks charge each individual at least Rs.100 per ATM card. For a joint account, if my husband and I each have an ATM card, the bank will charge us Rs.200 to Rs.500. The banks make enough money on every savings account and there should be no charge for a debit card. Plus; the idea of setting up an ATM is simple, routine transactions like withdrawing money and balance inquiry can be done by a machine so that bank employees will have enough time to sell other products which are very profitable to the bank e.g. life insurance, mutual funds, fixed deposits etc.

2.  Transfer Fee

This is one of the most ridiculous fees charged by banks. If I move from one state to another within India; or one city to another, I cannot perform any transaction at my local branch anymore since the account belongs to a different branch.  I was stuck in such a situation and was told to write an application requesting a transfer. I was never informed that the transfer would involve a charge of Rs.102. I was very upset about this and when I asked the nationalized bank, they simply responded that the charge is fair and square.

3.  Personal Accident Insurance Fee

My husband and I opened two separate accounts at a well renowned nationalized bank. We were both told that it is mandatory to sign up for personal accident insurance which gives a benefit of four lakhs. To gain the money, one must not only meet with an accident but also subsequently die. The banker forced us to sign on a document and deducted Rs.100 each (total of Rs.200) from both accounts.  I was not convinced and went home to read about this insurance. I read online that the bank did not mandate customers to purchase insurance. I also found out that the bankers (even the ones from a PSU) make a commission / bonus by selling these products. I was upset and went back to the banker the next day. She immediately refused that she had told me it was mandatory to sign. When my husband insisted, she pretended to make phone calls to help me.  Nothing came out of this. I went back home and called the bank’s helpline. It took the bank thirteen days to refund my money after I lodged a complaint. After this incident, I have only received hostile behavior at the mentioned branch.

4. Cheque Book Charge

Banks keep my money and make money on my money. To withdraw or transfer my own money requires a cheque book. I have to pay Rs.100 to Rs.200 for a cheque book with twenty five to fifty cheques depending on the bank. I had such a charge and went to talk to the manager of the bank. The manager was extremely busy and did not have the time to talk. After waiting for about forty-five minutes, the manger looked into the system and told me that I had been sent two cheque books by mistake.  She reimbursed the fee charged to my account.

5. Locker Fee

Since I moved to Bangalore, I needed a safe deposit box / locker to keep some valuables. We went from one bank to another but were constantly denied a locker saying they were all taken up. One of the nationalized banks replied in the affirmative about opening a locker but demanded a fixed deposit of Rs.5, 00,000. Another private bank mentioned that a locker “might open up” next week if we make an investment in some equity funds.  Finally we got a locker at a nationalized bank, by making a fixed deposit of Rs.20,000 for five years. The Chief of the branch also mentioned that we should not forget that he has done us a favor.
6.  Account Closure Fee
If I close an account at any bank because I move, change jobs or any reason of not wanting an account I am charged a fee ranging between Rs.50 to Rs.500. Once again, I am being charged so that the bank can give me back my own money – the money on which they have made big profits.
7.  SMS Alert Fee

Since July of 2013 banks are charging customer Rs.60 to Rs.400 per annum for SMS alerts. There is no option to opt out of SMS alerts. RBI is trying to tell banks that the charge should be based on usage and not a blanket fee for all customers.

How To Avoid Unfair Bank Fees and Charges?
  1. Certain banks offer a free debit card if a certain account balance is maintained or if an individual has a salary account with the bank.
  2. If you have to transfer your account from one branch to another, ensure that they will not charge a fee. If they end up charging your account, please speak to the manager. If the manager does not reverse the charge, file a complaint with the banking ombudsman started by the RBI. They listen to customer grievances and respond.
  3. Do not buy any accident insurance from a bank unless you want it. Make sure to read all documents before signing them.  Do not sign on a document where the intent of the document is not clear.
  4. As per RBI guidelines, customers are allowed one free cheque book a year. If a bank charges you for it, make sure you bring it up.
  5. As per RBI guidelines, banks can ask you to open a fixed deposit but not for more than three years locker rent. E.g. if the locker rent is Rs.1000 per annum, the fixed deposit demanded cannot be more than Rs.3000.
  6. If a bank charges you for closing an account, it is worth bringing it up with the manager. After I changed my job, I closed an old salary account and was charged Rs.251 as a closure penalty. I spoke to the manager and he reversed the charge.
  7.  If you do not want the bank to charge you for SMS alerts, ask if there is a way to opt out. If not, please let them know that you are aware of the RBI procedures. They will most likely reverse the charge.
  8. Make sure you scrutinize your account regularly to see if any unfair charges are levied.
  9.   Try to use the ATM of your own bank. Banks will not charge you an ATM fee for their bank ATM. For out of network ATM’s most banks charge Rs.20 to Rs.100 after the fifth transaction in the month.
  10.  If you have access to the internet, write an email to the bank explaining your grievance. Most banks have an email for this purpose. This creates a written trail and forces them to respond.
I was under the false impression that nationalized banks are better than private banks. But when it comes to fees and charges; nationalized banks are as bad’ if not worse than private sector banks.  We have to be vigilant to make sure that fees and charges are not eating up our hard earned money.

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