—- Choose a fee based financial planer to re align financial goals
Nobody knows how long anybody will live, but the covid 19 pandemic has made the situation extremely painful. We did not see death so closely before this. This year I have seen and known death of too many young people, between 30- 40 years, having small children. In some unfortunate situations, young couple died leaving young children.
In this hour of uncertainties, I am compelled to write this post dedicated to people who lost a young member in their families. This is a vulnerable time, however, we need to show resilience for the sake of the young children, senior citizen parents and other dependents.
I am writing this post assuming the deceased had a life insurance policy, some financial investments or enrolled under some employee benefits.
The right of handing the finances remains with the legal heirs and nominees
Keep Aadhaar card, Pan card, death certificates in one place and make a few copies for official purposes
Incase the deceased was an employee, connect with the HR team or reporting manager to check and understand the death benefits of employee and understand the processes to collect the same.
Speak to your life insurance agent seek help in filing death claims
Speak with health insurance agent to seek help in filing health insurance incase the deceased was hospitalized and eligible for health insurance claims
Mutual fund advisors and Bank home branches to get assistance to source Bank statements and further investment details may be retrieved
Make a diary to note down the investment details of stocks and mutual funds
When a working person passes away, financial void is created because of non credit of monthly salary. So, the first and most important thing one should do is create a system for monthly income to support family expenses, children education and healthcare.
Few monthly income options available are – Post office monthly income schemes, Bank fixed deposit month interest income.
One can also consider Annuity income plans from life insurance company. One can also choose a Systematic Withdrawal Plan on mutual fund schemes.
A good fee only financial planner should be consulted.
As the family steps into a new way of life, it will take some time to adjust the lifestyle. so, keeping six months expense in Bank savings account should be kept. This amount will come handy and work as a financial cushion.
One may need to relook at the entire ongoing financial planning for buying home, children higher education entirely. So, after securing a monthly cash flow, it is advisable to sit with a good financial adviser to plan financial future from here in new circumstances and changed life goals.
Hoping life will look up for everybody!
This is a evolving post, idea is to add and accommodate as much as relevant information one may need, so please share your suggestions, thoughts and ideas to make this post more useful for every one who may need it.
Are you asking these questions to yourself off-late? – How to deploy the retirement cash for stable and regular income? How to generate steady income after retirement?
How to invest the retirement money? What are the best investment for retirement lumpsum? How do I get a pension? Then this post is for you!
We hear many investment ideas during our working years – what should be done in 20s, 30s, and 40s etc. to save a good corpus as a retirement planning for good retired life. In this post we will aim to discuss the pressing points on what should we do with our retirement money. We will try to create a financial plan for regular incomepost retirement and contingency plan for a comfortable retired life, especially if you don’t have an adequate pension plan. Let us answer the pressing points first.
What to do with the retirement payout you get from EPF, Gratuity, ex-gratia and leave encashments?
If we are talking about your entire financial assets here, we should get into a simple financial planning. a) Regular Monthly income b) Emergency Funds c) Health Insurance premium d) kitty for travel/leisure activities, – the four pillars of after retirement financial planning.
After retirement there would be some shift in your cashflow arrangement, you won’t be earning a salary in your account, your working medical benefits from employer may not sustain post retirement. With longer life expectancy, you are likely to live a longer retired life. Longer life however, doesn’t promise a healthy life, hence, medical cost likely to increase. Though there is a threat of increased medical cost, health insurer will charge you higher premium for lesser insurance coverage.
On the balance, you may not have any Home loan to pay, Child education would be covered. So, you should plan vacations, leisure activities too as per your income and retirement kitty.
Image by mohamed Hassan from Pixabay
So, it is wise to set aside at least a years’ expense in a liquid instrument like FD/ Liquid Mutual Fund etc. to cover any such emergency which may arise. After emergency planning, we can create a stream of regular income through planning your financial portfolio with following tools for a safe avenue and income. Let us look at the avenues to earn regular income post–retirement. Some of the post retirement investment options are as follows
Immediate Annuity policy/ schemes – Annuity schemes are available with all the life insurance companies in India. It offers slightly better rates than Fixed deposit rates. However, taxed as per income slab. One can buy it after retirement and choose a income term. There are a few options on income and maturity, it can be compared at a insurance aggregator site like policy bazaar.
Senior citizen Saving Scheme (SCSS) – This is a five year fixed deposit scheme available with Bank, this offers higher interest income compared to Bank deposit, a steady income scheme, having a lock-infor 5 years and interest income is tax-free.
Pradhan Mantri Vaya Vandana Yojana – Launched in Mid 2017, this scheme has a extended window till 2023. Under this scheme, retirees over 60 years can buy PMVVY. This is a one time premium. One can buy this scheme with LIC and opt for monthly, quarterly, half yearly or annual payout. It is a guaranteed income scheme with 10 years tenure, on investments made in the FY 20-21 till March 31, 2021, the interest rate of 7.4 per cent payable monthly i.e. 7.66 per cent per annum for the entire duration of ten years. It has a minimum investment requirement of Rs. 1.56 lakhs. The maximum premium can be Rs. 15 lakhs per person, The investment varies depending on the interest payment frequency. However, there is no tax benefit on this. Income will be taxed as per income slab.
Liquid Mutual Fund (Debt Fund) through Systematic Withdrawal Plan – This can be a option. Within debt mutual funds, this is considered to be the safest category of fund. One can put a lumpsumamount in a good liquid mutual funds scheme and opt for monthly/ Quarterly/ Half-yearly SWP. One can choose particular Units / fixed amount to be withdrawn in a given frequency. It can generate a fixed income. This scheme offers return at par with short-term fixed deposits or savings schemes but it is tax efficient compared to FDs. As the name goes, this is the most flexible deposit scheme and can be withdrawn or redeemed at any given point. This option can be used for keeping emergency fund as well. Mutual Funds also offers various Monthly Income Plans in debt and Hybrid category.
Monthly Income plans – Post office offers MIS scheme, many good NBFC Companies also offers monthly income schemes and offer higher interest rates for senior citizens. But you should be aware and comfortable with the scheme, it is a good idea to check with your financial planner/ advisor to opt for such schemes.
There are many Post retirement investment options, but there is no requirement of continuing the life insurance unless and until you have any financial commitments and responsibilities, but health insurance take priority here. With growing life expectancy and sky-rocketing medical expenses, having health insurance is must. The health insurance companies offer various insurance plans for senior citizen, you should choose carefully.
The best time to start your retirement is as early as you can, to accumulate maximum wealth – National Pension Scheme – NPS is one of thee best scheme available to support your future pension needs if you contribute regularly. However, it is never too late. There are many financial products available to secure your retirement, however, it is important to do some research, plan according to your requirement.
There is nothing called best investment, you need to plan your investment to best suit your financial needs. It is wise to take help or guidance of an financial advisor to make a solid plan for your financial well being.
Finance Minister Ms. Nirmala Sitharaman presented the Union Budget 2021-2022 on 1st Feb, many analysis, news reports have been published since then. So, what is new here, here I have noted down points which nobody will tell you otherwise ‘for individual tax payers’.
This union budget has been special in many ways, especially after Covid-19 pandemic which saw unprecedented economic shocks and health hazards across the globe. India suffered big blow with negative growth in the first half of the budget included many announcements to push economic recovery.
But in this post, I would like to bring forth the points which matters to all the salaried citizens of India. The blog post would cover the salient points of the budget, brief analysis – which is not covered in news reports, key take away of the budget or as we prefer calling it – ‘Call to action. ’
Key points for Indian Tax payers –
1. There is no change in the income tax slab from the past year (Last year Government introduced a category for individuals which is for people who do not want to claim tax benefits under Section 80C -)
2. Introduction of taxation on interest earned on EPF for a contribution more than 2.5 lakh in a financial year.
3. Introduction of tax on maturity for life insurance policies at 10% (like mutual funds) with premium more than Rs. 2.5 lakh premium
4. Simplification in tax return filing for senior citizen
So what is the issue with these announcements?
The issue is not with the individual announcement itself, but the trend which is being set for past few years. While government is taking a lot of initiatives of financial inclusion and social security to protect the poor, and various tax benefits to accommodate the entrepreneurs and industries, it is the salaried section which is getting excluded from benefits gradually but surely.
– The budget gradually have bucketed the individuals in three categories – low income, mid income and high income. The more you grow up the ladder in the income through salary segment, the more tax you need to pay.
Will government lower the taxes?
Well, I don’t know. However, looking at the trend, it will only be done to adjust to inflation or major economic disasters.
Image by Steve Buissinne from Pixabay.com
Is government Cruel to taxpayers?
Union Budget is about strengthening balance sheet of government, identifying the loopholes and opportunities to keep-up the income for government to create a balance, growth and inclusion in the society. People with a steady, secured job and growing salary is not on government’s priority list. Government needs to keep a focus on feeding the under-privileged, creating enough job opportunities, securing the borders, so on and so forth. So, tax payers are much better placed with employer benefits and steady monthly income compared to larger society and on the least on priority for government welfare.
Why Government is unlikely to increase the tax benefits under section 80C and 80D?
There is no incremental tax incentives for FY 2021-2022. we may consider as one off year, where government encourage to spend the money to speed up economic recovery. But these tax incentives will be less and less significant in future, with time and growing salary, 80C and 80D will make up for a very small portion of our overall financial planning. Government introduced various small savings schemes and investment avenues to build a savings habit and self-sustaining financial positions for citizens with such schemes. These tax incentives on equity investments, PPF, life insurance has forced many tax payers to get into a financial discipline.
Over decades, the income has improved to average $2000 per capita annually in India, government is focusing its efforts towards individuals belonging to lower income bracket. Government over the decades with tax incentives has created markets for Indian equity, insurance and mutual funds and insurance industry. Now the market is maturing and government will take its share of the revenue with taxes.
Now, capital gain tax of 10% introduced for all long-term capital gain tax on equity mutual funds over 1 Lakh, GST on health and life insurance premiums too in recent past. ULIP income coming out of Insurance premium over 2.5 lakh will be taxed at 10% like equity mutual funds.
For deposit schemes, by introducing small savings schemes, government borrowed money from the individual citizens offering marginally higher interest than Bank deposits. However, with lowering interest rates and various avenues to raise funds for its expenses, PPF, EPF, Sukanya Yojana are high cost loans for government, presently only avenues which offer triple tax exemption. So, government will limit this exposure too.
In the process, we have also accumulated wealth. But, tax incentives will not and should not last forever.
So, do we not have a solution to the issues of increasing tax burden? And how?
We should learn these from the rich people. Taxes are first created for the rich, then it trickled down to the middle class. Lower income group, thanks to the new initiatives will be protected by various social security schemes. Rich don’t pay as much tax as middle class in percentage term of their income. Rich learns the methods and ways to reduce the tax payout by choosing the assets their income coming from.
Food for thought – What to learn from the rich?
Here I am not talking about the highly paid salaried individuals with low financial skills.
– We need to use all the avenues of tax savings under section 80C, extra 50 thousand rupees for NPS over and above Rs. 1.5 lakh, health insurance for self, parents
– Buying adequate life and health insurance even if we don’t get tax benefits on it.
– We need to remember long term capital gain on equity over 1 Lakh is still only 10% and short-term at 15%, much lower than highest tax slab of 35%, so equity based investment is still lucrative
– Fixed deposit is paying lesser interest but above 10 thousand, still taxes at salary tax slab
– One should avail home loan when the interest rate is low and yet the home loan has all tax deduction benefits
– Our financial health should depend on the tax incentives provided by the government
– Most important lesson we need to remind ourselves, “A Business pays taxes after deducting all its expenses and Employee pays tax first and buys everything with their highly taxed income”
Last but not the least, you may not get any tax benefits by up skilling yourself and reading good books, but you will accumulate enough information and get educated about how to make the tax laws work in your favor and live a rich life!
Education offers exponential and infinite returns.
Politics aside, I admire the pace at which Indian Government have been implementing financial inclusion and social security schemes. In my earlier Blogs and Vlogs I have mentioned key features of the PMJJBY, PMSBY etc. Many of these products were for aimed to include the citizens who were completely excluded from the formal financial system, however others were allowed to take the benefit. We should learn about the schemes and benefit from them.
In its latest move to include lower middle class, middle class, workers and entrepreneurs of informal sectors, people with extreme sports hobby, fire officials etc. IRDA issued guidelines for a standardized life-insurance/ term-insurance products , every life insurance company were mandated to take it live or atleast apply for approval from IRDA by Jan 1, 2021. However, the deadline could not be met and life insurance companies are likely to launch the Saral Jeevan Bima policy in the month of February 2021.
What is proposed in Saral Jeevan Bima?
Life Insurance Sum Insured – Rs. 5 Lakhs to 25 Lakhs
Minimum – Maximum age for entry – 18 years – 65 years
Tenure – 5 years to 40 years
Premium paymentfrequency – Single / limited pay/ Regular pay
Policy Lapse – For monthly/ quarterly/ semi-annual premium grace period is 15 days, for yearly payment, grace period is 30 days
Maturity Benefit – None
Death benefit – Sum insured to be paid to nominee
Waiting period – 45 days
Riders – Accidental death and permanent disability rider available
Saral Jeevan Bima is a standard life term insurance plan where the nominee gets the sum insured incase of demise of the policy holder during the policy term. The premium may vary company to company but the contract will be same – i.e. standardised, Hence, the policy premium per lakh may be expensive than the present term products of the company. If you are one of them who is still have apprehension about Term insurance, or your salary don’t allow you to get 50 lakh term plan, this plan would be a perfect product to protect your family or loved ones from sudden misery on untimely demise.
It has no maturity benefit. This likely to be much cheaper than ULIP , guaranteed insurance plan etc as the premium is only on life risk, not investment.
In existing Term plans have host of common exclusions like – pre-exiting illness, sportsmen, firemen etc, and death circumstances, Saral Jeevan Bima likely to be more inclusive. Saral Jeevan Bima will be available with all life insurance companies including LIC, HDFC Life, SBI Life, ICICI Prudential Life Insurance, Aegon, Edelweiss Tokio and so on.
As companies yet launch the policies, the exact terms and conditions etc are yet to be known. Hopefully by February will know more, and will update you soon.
— Personal loan or Over draft against FD or RD which one should you take?
— FED Rise – Over Draft facility against Recurring Deposit, by Federal Bank
Indian Financial system is opening up for loans. After Overdraft on Fixed Depositand Gold, Banks have started offering Overdraft facility against Recurring Deposits. This Bank offers loan against recurring deposits.
Loan against fixed deposits, Gold Loan OD is getting increasing popular for emergency needs or small business expenses owing to its low cost and efficient options for depositors. One more low cost loan available is Loan against Recurring Deposits.
Personal Loan Vs. Over draft against Fixed deposits/ Recurring deposits
personal loan comes with minimum threshold, processing fee, and pre-payment charges. It also cheks back the repayment history of the borrower
Over-draft facility has no processing fee, lower interest cost, no processing charges and flexible payment option. The limitation of OD is its capped at 90% of the FD or recurring deposit maturity amount. The repayment term is also capped at the tenure of the deposit.
Loan conditions
Personal Loan
OD against FD
OD against RD
Minimum limit
Yes
No
No
Maximum Limit
Varies
95% of Fixed Deposit*
90% of maturity amount
Flexible payment option
No
Yes
Yes
Tenure
Pre-decided
Upto the maturity date
Upto the maturity date
Intereste rates
High
FD Rates+1-2%
RD Rates + 1-2%
Non-payment of EMI
Charges upto 2% of EMI amount
Flexible payment upto the maturity date
Flexible payment upto the maturity date
Loan processing Fee
Yes
No
Minimum
Pre-closure Charges
Yes
No
No
Credit History Mandatory
Yes
No
No
Documentation
Yes
No
Minimum
Personal Loan/ Over Draft Facility
In this post, we will take the example of Federal Bank’s Over draft Facility on Recurring deposit – Fed Rise. Fed Rise is an OD facility against recurring deposits. Federal Bank is one-of the first movers among Indian Banks in the Over Draft facility against Recurring deposits. Let us look at its features.
Fed Rise is an overdraft facility against recurring deposits
–Allows OD Facility upto 90% of the maturity value
—Overdraft Limit – 90% of the balance outstanding in recurring deposit can be availed by the customer at any point of time
—Loan Tenure – Upto Maturity or 120 months, which ever is lower
–Minimal documentation and Quick processing
–Facility to withdraw the amount through ATM, internet banking, POS and all other channels by linking to savings account balance.
–Repayment can be made as lumpsum
–Customers including NRI’s who have recurring deposits maintained with Federal Bank in the name self or third party are eligible.
—Interest rates – For own Deposit: RD Rates rate+2.00%, (approximately) for third party RD Rates +2.50%, whichever is higher – Please check the Federal Bank Website fo more details on Fed Rise
—Processing Fee – For loans up to Rs. 10L : 0.15% of the sanction limit, subjected to a minimum of Rs 250/- . For loans above Rs 10L : 0.25% of the sanction limit
FED Rise – Incase of Default – If the customer is defaulting in monthly installments in RD consecutively for 3 months, the limit shall be set off against RD
In this post I have taken the details of Federal Bank, however other Banks such as State Bank of India and ICICI Bank also has such option.
Loan against Recurring Deposit, ideal for business and emergency purpose, next best option after Overdraft against Fixed Deposits.
I write on investment, insurance, Mutual Funds, Credit Cards, everything personal Finance and Financial Education. You can follow me on twitter and Facebook too. Look forward to see you soon. Do share your queries and suggestion in the comment box.
This loan is Best for Emergency situations – Low cost and No time. May sound unrealistic, but it is true.
This is the lowest cost loan available from Bank, no question on credit rating, no due diligence is required from Bank on repayment ability. This option is handy, affordable and quick for the customers. Banks like SBI, ICICI, AXIS Bank, HDFC Bank, Bank of Baroda, Federal Bank offers this option. Please check your internet banking section or speak with the nearest Bank branch to get more information.
Overdraft Facility on Fixed Deposit: Lowest Cost Loan
On emergency situation, education or business needs loan helps us sail through unplanned expenses. However, often in time as such, we end up taking a hasty decisions on swiping credit card or taking expensive Gold loan from NBFCs. While these loans can be taken quickly, it often have very high interest cost, and non-payment or long term EMI option can turn very expensive option.
Federal Bank is offering OD Facility against Recurring Deposit too
Bank offers this option which is rarely used by the savings bank customers. Many big Banks offer Overdraft facility against Fixed deposit or term deposit. And the interest rate is 1-2% higher than the interest rate you are getting on the fixed deposit.You can easily apply for the OD on your term deposit through Net-Banking.
Who can take OD against FD or term deposit?
This loan option can be taken by any account holder who has a fixed deposit with the Bank, except 5 year term Tax Saver Fixed Deposit
The loan amount is capped at 80% – 90% of the Fixed Deposit amount. For Example – Axis Bank has a cap of 85% on the Fixed deposit, Yes Bank OD has 90% cap on the loan.
Features of Over draft against Fixed Deposits
No processing fee
Low interest cost
Banks may have the individual OD eligibility criteria of minimum fixed deposit and Maximum OD limit etc
While taking OD, your FD will continue to earn interest.
Its a flexible option, one can take any amount up to the cap amount
One can withdraw multiple time and repay multiple time
Loan interest is charged daily basis, and only charged on the outstanding amount.
If Overdraft is not availed, no interest charges are applied
The loan tenure can be be up till the term of the fixed deposit
No Pre-payment charges
One needs to have a Fixed deposit of the same Bank to avail the overdraft facility
This loan is much cheaper than unsecured personal loan or instant credit card loans. For Overdraft Against Term Deposit, the interest rate will not depend on the credit score, but on the interest rate of the Fixed Deposit.
— You can wave your phone to make payments through your IDFC First debit card Wave phone
–SafePay will make retail store or PoS payments contactless experience
IDFC FIRST Bank is set to launch SafePay, a digital facility that allows contactless debit card payments by simply waving one’s smartphone against a Near Field Communication (NFC)-enabled POS terminal.
SafePay will help Debit card users to maintain social distance while making purchases at retail stores and malls. There is no need to hand over the card to a merchant or even carry it in the wallet or purse.
Users can simply wave, pay and go, making the payment process not only touch-free, but also faster, simpler and safer.
Contactless payment
The first such facility to be made available in an integrated mobile banking app, the SafePay feature has been tested successfully and certified by Visa. It will be available to users on the Bank’s mobile app in the next one week.
SafePay enables contactless payments of up to Rs. 2,000 per transaction and up to a limit of Rs. 20,000 per day, making everyday purchases easy.
To enable SafePay, consumers need to do a one-time activation by linking their IDFC FIRST Bank debit card to the mobile banking app. Once activated, users can then make payments at merchant locations by just unlocking the mobile phone and waving it against a NFC-enabled POS terminal, through which encrypted card information is transmitted wirelessly to the terminal. Users do not need to log into the Bank’s mobile app for every transaction. The debit card can be added to the mobile app and deleted if required. To enable a payment, the NFC-enabled smartphone needs to be waved at the terminal within 30 seconds of unlocking it.
SafePay is part of the Bank’s efforts to deliver a high quality digital experience to customers across its range of products and services. In the payments space, the Bank’s emphasis is to make transacting simple, seamless and safe.
The facility is set to be available for resident Savings Account holders having VISA cards and IDFC FIRST Mobile App on NFC-enabled Android device with OS 5 & above.
To activate SafePay:
Link the debit card to IDFC FIRST Bank Mobile App
To pay, unlock the NFC-enabled smartphone
Wave it against a NFC-enabled POS terminal; encrypted card information is transmitted wirelessly to the terminal
I write on investment, insurance, Mutual Funds, Credit Cards, everything personal Finance and Financial Education. You can follow me on twitter and Facebook too. Look forward to see you soon. Do share your queries and suggestion in the comment box. #MyMoneyStreets
Buy Scooty, Bikes from 947 showrooms of HeroMotocorp, Honda Motorcycle and TVS Motors with 1 Rupee down payment. No-Bank visit, No-processing charge, complete online. Flexible Repayment period – option of 3/6/9/12 months. EMI Without Credit Card, no hassle of going to Bank Branch.
This is also an ideal option for Essential Service Providers, Shops and Healthcare professionals, students, home makers and each one who risk themselves travelling in Public Transport or spend huge money in Taxi or Car. Buying a two-wheeler is no more an difficult or Costly option. With Debit Card EMI offer, now you can buy a scooty or Bike and travel alone to office and important work without being scared of catching the virus in Public Transport. In the pandemic times, Own vehicle is safe vehicle.
Federal Bank is one of the first Bank to come with this flexible offer. You don’t even have to Visit Bank Branch. Use your Federal Bank ATM Card to buy in EMI.
Federal Bank introduces EMI facility for holders of Federal Bank Debit Cards to purchase two wheelers. Eligible customers of Federal Bank can own their favorite two wheeler by making a payment of ₹ 1/- at 947 showrooms of Hero MotoCorp, Honda Motorcycle and TVS Motor. The financing process involves no paper work or bank visit and is done completely online. Unlike conventional two-wheeler loans, hypothecation in favor of the Bank is not required for vehicles purchased on Debit Card EMI from Federal Bank. Customers can choose a repayment period of 3/6/9/12 months. There is no processing fee charged on loans under this scheme.
Customers who purchase two wheelers from 793 Honda Motorcycle showrooms across the country availing EMI on Debit Card from Federal Bank will also get a cash back of 5% as festival offer. Customers can check their eligibility for EMI by sending an SMS in the format DC<space>EMI to 5676762 or giving a missed call to 7812900900.
With sale of passenger vehicles and two wheelers showing an upward trend on the back of demand spurred by festive season and social distancing protocols and a reduction in GST for two wheelers on the cards, this option of easy finance and cash back offer is expected to give further impetus for Federal Bank customers wishing to own brand-new two wheelers. The Bank offers EMI on Debit Cards for purchase of consumer durables at over 36,000+ stores PAN India. The Bank has recently started offering EMI for purchases on e-commerce portals Amazon and Flipkart too.
I write on investment, insurance, Mutual Funds, Credit Cards, everything personal Finance and Financial Education. You can follow me on twitter and Facebook too. Look forward to see you soon. Do share your queries and suggestion in the comment box.
Easy monthly installment for Big Purchases in Retail outlet and online shopping: Debit Card EMI.
Easy payment options is not limited to Home and Car purchases. The benefit has now extended to other big-ticket purchases too. Online sopping websites as well as retail shops are offering EMI options on shopping as low as Rs. 5000/-. Debit card EMI offers option to the customer to buy high value products with easy monthly payments avoiding one time cash erosion from Bank Account.
What is EMI on debit card? Is EMI available on debit card?How does EMI work on debit cards? What is the eligibility for debit card EMI? Is my debit card eligible for EMI?
The Benefits of Debit Card EMI
– You can shop for high value items in easy installments without braking your savings
– You can spread your expenses, one time expense wont stretch the monthly budget
– Keeping cash in Bank account longer and earn interest on it, maintain high Quarterly average Balance to avoid charges too.
How to opt for Debit card EMI?
Debit Card EMI works both in Online shopping as well as retail stores.
For online shopping in Amazon, EMI option will appear in checkout and payment section. You will need to check if your Bank is offering EMI option. If you simply search “EMI on Debit card” it will take you to a page showing the various Banks offering this options, you can check the eligibility by sending a SMS from registered mobile Number to your Bank. The SMS numbers to check the criteria is mentioned in the picture below, if you are a customer of one of the following six Banks. If you meet the eligibility criteria of your Bank, your purchase will be approved by your Bank for EMI option.
How debit card EMI works?
This is a pre-approved transaction by Bank, so check the eligibility first. This is like taking a loan in less than a minute, extensively used for purchase of consumer durable. However, the canvas of this Debit card EMI is expanding to other products and services. One attractive term used for this EMI option is “No Cost EMI”. Let us see how it works.
For No Cost Debit Card EMI offers, the interest is borne by the merchant or the product manufacturer. Bank may charge the GST on interest amount. For a shopper, the interest amount is discounted from the order price. Total amount you pay to the Bank will be equal to the price of the item. For other EMIs, Banks may charge processing fee and interest rates equivalent to personal loan interest rate.
In Retail shops, you can check at the store billing counter with your debit card to check. Though the offers are available with Amazon, Flipkart, and few big format shops, now PoS providers like MSwipe and PineLabs are enabling the retail shops to offer such benefits.
Amongst many Brands, Amazon, Flipkart, Central, Croma are popular retail Brands.
Amazon offers EMI on SBI debit card, HDFC Bank Debit card, Federal Bank Debit card, Axis Bank, ICICI Bank, Kotak Bank. On its Website, Federal Bank mentioned that it offers Debit Card EMI on Manipal Hospital Bills too apart from the retail purchases.
I went through websites of these Banks to check the EMI offers, EMI eligibility criteria and other Debit card EMI conditions. I am using Federal Bank EMI option as a test case for sharing nuances of Debit card EMI facility as a test case. Other Banks may have slight difference in offerings.
The Key features of Federal Bank Debit card EMI
Mentions in it’s website that it is not necessary to have the entire amount
EMI term could be – 3 months, 6 months, 9 months or 12 months, as opted by You
No documentation, no down payment, no pre-closure charges, no amount blocked in account
Minimum loan amount Rs. 5000 to Maximum Rs. 1,50,000
Federal Bank offers no-cost EMI in Retail store purchase such as – Apple, BlueStar, Canon, Daikini, Haier, Godrej, Hitachi, Lloyd, Microsoft, Nikon, Nokia, LG, Oppo, Panasonic, Samsung, Toshiba, Vivo, Voltas, VLCC and Whirlpool. You can check available options in store locator options in Federal Bank Debit Card EMI section
Rate of Interest: varies between 14-15% based on tenure
Debit Card EMI facility is not available for non-resident Indians.
For all offers where, ‘No Cost EMI’ is mentioned, the interest portion will be borne either by the merchant/brand.
Important things to remember on EMI on debit cards –
Prior to the completion of the Facility/Pre-closure whichever is earlier, Customer cannot withdraw/cancel auto debit instruction on the Debit Card EMI Loan.
Incase of cancellation off product purchase, the customer should inform the Bank at the earliest to avoid any inconvenience. Also, the amounts charged towards shipping / cancellation/ return or of any other nature, for the cancellation/ return shall be paid by the customer along with applicable interests as afore-mentioned.
EMI offers an easy solution for difficult purchase. However, one should be cautious and calculative about such purchases. You shouldn’t get carried away with easy monthly scheme, as it can make a dent in your budget and regular savings habit. An ideal reason for purchasing in EMI should be for some important needs such as health and education. But, it could vary person to person depending on the stage of life, it could be laptop, good camera, furniture, refrigerator anything.
Claim settlement ratio? repudiation ratio / rejection ratio or the largest Insurance company?
Who is the best insurance company for you? How to choose the best company and best policy?
The main purpose of buying term insurance is to ensure that after the death of policyholder, nominee or legal heir gets the sum assured. It could be very sad in case the insurance company rejects the policy claim to the nominee. Hence, it is important to choose a right insurance while keeping in mind about the common exclusions.
While the popularity of Term insurance is catching pace, so is the complications coming to the fore. Many people including ones who sells endowment policy claims that in term insurance nobody gets money back.
Well that is not true, term insurance is comparatively new and still finding its base, awareness is low and it will gain pace with time as people get hands on experiences. However, as it is likely and we all hope that most of the policyholders will outlive the policy term, (mostly ranges till 60-70 years of age), people feel it is unreasonable and unnecessary, many end up buying the cheapest policy online without any homework. There are also cases of hiding (or non-disclosures) of medical conditions to get cheaper premium, and not writing hobbies (adventures, bunjee jumipng, horse riding etc) to avoid rejection while buying the policy. There is a list of common exclusion which is followed by the life insurance companies. Apart from the common exclusion, we should also educate ourselves on criteria on how do choose the best insurance company, which will stand in our favour incase of life loss of the policy holder.
You can give a weightage based marking system on the below mentioned parameters. Keeping 5 marks for each criteria, and marking 1 for lowest performance on the parameter and 5 for the highest.
Though do check out the premium amount of each insurance, but it should not be a criteria of choosing insurance
Here is a list of criteria I personally followed while choosing term insurance –
Which company is offering your desired insurance cover and package – List down what is the kind of cover you are looking at, are you looking for a rider like Personal accident cover/ Critical Illness benefits or Premium waiver or multiple option of payout of death benefit. First step is to short-list your requirement.
Tip – Its a good idea to bundle your Critical Insurance cover with Life insurance and not health insurance, as in life insurance you lock your premium of entire term, while Health insurance premium keeps increasing based on age and claims
Company history/reputation – In financial services, trust is the first factor. So, knowing how the Brand in general is perceived by you, your circle of friends who happens to work in financial services can come handy. Doing a google check on the news on the company/ promoter, checking its review would be helpful. Check how long the company is in operation specially in India and how the news have been on their claim settlement experience (simple google check – insurance company + issues on claim settlement) will give you some snapshot on how the negative experience have been on the particular company. It is good idea to short list companies a per their age – ideally more than 5 years of operations.
Do keep a criteria on How long they’ve been in business; In which states they sell their products and how is their quality of service
Claim settlement Ratio – A crucial matrix for shortlisting the insurer. It is considered that higher the claim settlement ratio, higher the chances of settling your insurance claims. While considering an insurance company, check repudiation ratio and rejection ratio of the claims too.
Based on 2018-2019 IRDA data on claim settlement ratio of Life Insurance companies
According to latest Annual report of IRDAI, Claim settlement ratio of LIC was at 97.79% as at 31.03.2019 when compared to 98.04% as at 31.03.2018. For private insurers, settlement ratio had increased to 96.64% during the financial year 2018-19 when compared to 95.24 % during the previous year
Claim Amount settlement ratio – Claim settlement ratio can be looked at in two ways, first is no. of claims settled based on claim received, a volume measure and second is the ratio of settlement ratio based on claimed amount
Claim repudiated / claim rejection ratio – This is an important parameter, in any scenario, if this ratio is closer to one or above 1%, just tick-off the insurance company off your list, even if it is meeting all other criteria
Image taken from IRDA Annual report 2018-2019
Pending claims ratio – This figures shows what are the pending claims application lying with insurance companies. Ideally a company should close the claim within 30 days, but there are times, when the companies take a lot of time to conclude their investigation resulting into agonizing waiting game.
Solvency ratio – Financial strength of your insurance is important. Minimum solvency ratio of insurance should be 150% as per IRDA. Higher solvency ratio is a good way to look at it, however, the decision should be made keeping in mind the claim settlement ratio as well.
