Do you know how much your bank charges and penalises you?
Having a bank account and making use of all the services that it offers do not come free of cost.
Having a bank account and making use of all the services that it offers do not come free of cost. It is not just about maintaining a minimal balance. Your bank deducts amounts periodically for various services, from your account. Let’s take a look at these charges that nibble away at your bank balances.
“While opening a bank account most customers ignore reading the terms and conditions of the bank along with charges applicable for the services,” says Rohit Pawar, financial advisor at Kuber financial services.
Non-maintenance of minimum balance
Every savings bank account requires you to maintain a certain balance. If your balance falls below this limit, your bank charges you. It could either be monthly or quarterly balance. Adhil Shetty, CEO of BankBazaar, says, “The charges could be a fixed amount, a percentage of the shortfall, or both, depending on the bank’s norms.”
For instance, HDFC bank mandates a minimum balance of Rs 10,000 in metro and urban branches and Rs 5,000 in savings accounts for semi-urban and rural branches. If the average minimum balance is between Rs 7500 and Rs 10000, the bank will charge Rs 150 plus taxes. Similarly, if the average minimum balance is between Rs 5000 and Rs 7500, the bank will levy a penalty of Rs 300 plus taxes, and so on.
Debit card fees
This usually depends on the type of savings account and the debit card you hold. The more feature-rich your debit card, the higher your fees. Some savings accounts may allow free debit cards. Banks charge Rs 99 to Rs 750. For instance, there are annual charges of Rs 150 for a regular debit card of HDFC Bank, but if you use a platinum debit card, you have to pay an annual fees of Rs 750 plus taxes as applicable. If you lose your debit card, you may need to pay Rs 200 on an average for a replacement card.
Mumbai-based Mandaar Bandodkar, 43, found that his bank had deducted debit card fees and locker charges of Rs 3,000. “The bank directly debited my account with both the charges,” says Bandodkar. Later, he ended up paying an additional Rs 800 to the bank for a failed transaction on a loan instalment and for not maintaining the minimum balance in his savings account.
Money transfer charges
Money transfers through the immediate payment service (IMPS), national electronic funds transfer (NEFT), and real-time gross settlements (RTGS) are charged depending on the amount slabs and vary from bank to bank. So, if you visit a branch for any of the money transfer services then bank charges are applicable. At bank branches, NEFT charges range between Re 1 and Rs 25 plus goods and services tax (GST); RTGS charges range between Rs 5 and Rs 50 (plus GST) and IMPS fee ranges between Re 1 and Rs 15. However, NEFT and RTGS transactions initiated through online modes are free.
ATM transaction charges
Normally, banks allow up to five transactions a month in their own ATMs, and three transactions at other banks’ ATMs, free of charges. If you exceed these limits, you may end up paying around Rs 20 to Rs 50 per withdrawal.
For instance, ICICI Bank allows eight free ATM transactions in a month for savings account holders in metro cities. This includes five transactions from ICICI ATMs and three transactions from any other bank’s ATM. After exhausting the free ATM usage limit, it charges Rs 20 plus GST for cash transactions. For non-financial transaction, Rs 8.5 plus GST will be charged.
Duplicate statement charges
Banks offer an annual account statement once in a financial year in physical mode for tax filing purpose. However, if you request for a duplicate account statement, it may cost you between Rs 50 to Rs 100 as per specified number of entries or around Rs 10 per page, depending on a bank’s norms. The bank charges you less if you apply through net banking.
For instance, ICICI Bank charges Rs 100 per duplicate statement if you apply at a branch and Rs 50 per statement if you apply through net banking.
Failed ECS transaction
Not having enough balance in your account will attract charges. But there’s additional penalty if your ECS payment fails due to low account balance. Banks charge you every time an ECS transaction is rejected. Some banks have a flat penalty for all failed ECS transactions. However, there are some banks that charge more after a second failed transaction in the same month due to insufficient funds in the account.
For instance, HDFC bank charges Rs 500 plus GST – a flat penalty for failed ECS transaction.
Banks restrict the number of cash transactions in a savings account to three to five per month and levy charges if you exceed a specified number or amount. “Thereafter, cash transactions are charged either as per prescribed slabs, or through fixed charges on a per-transaction basis,” says Shetty.
For instance, Kotak Mahindra Bank allows four free transactions or cash transaction of up to Rs 2 lakh (includes cash deposit and withdrawal by self or third party) in a month, whichever is earlier. Once the limit is breached, the bank charges Rs 3.5 per thousand, subject to a minimum of Rs 150 per transaction.
A retail banker requesting anonymity says, “Handling cash transactions is a cost to banks. In the environment where we are propagating in, cashless and digital, these charges are required as customers need to be pushed to adopt newer and easier avenues of transactions.”
Other bank charges
Apart from these, banks may levy fees and penalties under different situations: cheque bounce (return due to insufficient balance), SMS service fees, account closure, outstation cheque handling charges, issuing new cheque book, demand drafts, reward point redemption, locker rent, PIN regeneration and more. These charges vary from bank to bank. Sapna Tiwari, Co-founder and COO, Rupeewiz Investment Advisors says, “Banks are charging you to recover their operational and overhead costs.”
Though charges and penalties appear manageably small, they can balloon to large sums if you aren’t prudent with your account usage. In case you have a dormant savings account, close it soon as possible, as charges for non-maintenance of balance, annual fees for debit card issued and more would be debited.
In these pandemic times, make use of your net banking facilities and save on costs for transferring money and applying for duplicate statements. Also, use the net or mobile banking facility to check balances, to pay utility bills and for other such transactions. These small actions save costs on new cheque books and reduce visits to ATMs for non-financial transactions.