Skip to main content

Improper Bank Account, Credit Card closure can cause problems

Invest In Tax Saving Mutual Funds Online

Call 0 94 8300 8300 (India)
 

Opening a bank account or getting a credit card may be difficult.

 

However, closing an account or surrendering a credit card could be equally tough, if not more. If you think it is enough to leave a bank account unclaimed or a credit card unused, think again. This could impact your credit history. Also, your account could be used for frauds.

Closing a bank account

If you have switched jobs and transferred your salary account to another bank, it is advisable to close your previous account. Most banks charge a fee for closing an account. The fee varies from bank to bank and depends on the kind of account--- whether it is a salary account or a savings bank account.

While closing a bank account, you have to surrender unused cheque leaves. If a credit card is linked to that account, you have to surrender that, too. In case there are loan payments linked to the account and payments are pending, it is possible the bank may not allow closure of the account.

Even if there is no money in your account, you can't leave it unused. A salary account loses its status once the accountholder changes the job; it becomes an ordinary savings bank account that requires a minimum balance.

If this balance is not maintained, the bank could keep charging a fee for it. If you don't close the account, you may find yourself owing the bank a tidy sum.

Often, letters to accountholders informing them of negative account balances are auto- generated. " Such letters are issued because the bank doesn't know the account is not being used. In such a case, it is best to inform the bank that you are not using the account," says the head ( consumer banking) of a foreign bank. While it isn't possible to recover money from deposit holders, if money is deposited in the account in the future, the bank may deduct its fees from this amount, he adds.

To close a bank account, you must either write a letter to the bank or fill an application form ( if the bank has one) and seek closure. Any balance would be paid either in cash or through a demand draft.

Surrendering a credit card

While surrendering a credit card, it is vital to get an acknowledgment from the bank. Merely cutting the card into pieces and mailing it to the bank may not be sufficient. It may happen a renewal fee is charged on the card and it shows as unpaid dues, though the card holder is not using it. So, you can insist for a letter from the bank.

Many a times there could be a pending sum against your credit card even after you have stopped using it, owing to a dispute over, say, wrong billing. Therefore, contact the bank, resolve the dispute and ask the bank officials to issue a letter to that effect.

Unpaid credit card dues could be a hurdle when you apply for loans. In case you have settled your credit card dues and the bank agreed to waive a part of the amount, you might assume the matter is settled. However, it may be reflected as unpaid dues in the bank's books. This would affect the borrower's creditworthiness.

When applied for a home loan, it was rejected by the housing finance company. Though he was eligible (based on his salary), the company was wary of sanctioning the loan due to his low credit score. Mhatre's credit score was based on a credit card loan he had settled about two to three years ago. Since he had just started working and his salary wasn't substantial, the bank had agreed to waive apart of the huge dues on his credit card; Mhatre had agreed to pay the rest. What he didn't realise was since the amount was waived, his account was considered active, not repaid in full. This was the record with the credit bureau, a record other banks had access to. Therefore, Mhatre continues to be considered a defaulter.

Therefore, it is important for borrowers to follow up with the lender and ensure closure of old dues.

Closing a loan

In case of a settlement, it is important for borrowers to know how the loan has been treated. They must ask whether it would be considered a waiver, as a settlement is considered more negative than a loan repaid in full, but more positive than a default.

In a settlement, both parties ( bank and borrower) could agree a certain amount would be repaid. In this case, the bank may consider the loan as closed or a write- off  (the borrower says he/ she can afford to pay only a certain amount and the bank agrees, fearing it wouldn't be able to recover any amount). In such a case, the bank would consider the remaining amount as waived. This is how it is recorded by the credit bureau.

Banks opt for the settlement method in cases where the interest is high and, therefore, the unpaid amount increases over time. In such a case, the bank does not lose much. But for loans where payments are made in instalments, the bank may agree to waive a part of the amount if it gets some money.

How the bank classifies the loan depends on the kind of loan, the bank's policy and its accounting practices. Unless a borrower asks for it, banks don't issue a letter about the dues being cleared. So, ensure you ask for one. You may find it difficult to get a loan within one to two years of your loan being waived, as is the case with Mhatre. But after about three years, the process could be easier. So, the best option for someone like Mhatre would be to wait for a couple of years.

As data with the credit bureau ages, the weightage of the data would go down. The borrower is given time to reform and build his or her credit record. For partial payments, banks reserve their right to collect; they wouldn't show this as something they want to give up. So, if your loan is repaid, ensure you get a letter from your bank acknowledging this. Also, preserve the letter.

Insurance policy

For insurance policies, if you have decided to let these lapse, ensure you claim the applicable surrender value. Else, get a letter from the insurance company saying the policy has been closed, and preserve that document. The latter is vital if the policy does not reach a surrender value; otherwise, the policy could be sold to someone else for premiums. However, the policy would continue to be in the name of the original holder. The fraudulent person stands to earn on two accounts. First, if the original policyholder dies, he would get the entire sum assured, thereby turning his money into ' white money'. Or, when the policy matures, he would get the entire amount in ' white money'. However, there might be a problem if the original policyholder wants to revive the policy.

Happy Investing!!

We can help. Call 0 94 8300 8300 (India)

Leave your comment with mail ID and we will answer them

OR

You can write back to us at PrajnaCapital [at] Gmail [dot] Com

---------------------------------------------

Invest in Tax Saving Mutual Funds ( ELSS Mutual Funds ) to upto Rs 1 lakh and Save tax under Section 80C.

Invest Tax Saving Mutual Funds Online

Tax Saving Mutual Funds Online

These links can be used to Purchase Mutual Funds Online that are regular also (Investment, non-tax saving)

Download Tax Saving Mutual Fund Application Forms from all AMCs

Download Tax Saving Mutual Fund Applications

These Application Forms can be used for buying regular mutual funds also

Some of the best Tax Saving Mutual Funds available ( ELSS Mutual Funds )

  1. ICICI Prudential Tax Plan Invest Online
  2. HDFC TaxSaver Invest Online
  3. DSP BlackRock Tax Saver Fund Invest Online
  4. Reliance Tax Saver (ELSS) Fund Invest Online
  5. Birla Sun Life Tax Relief '96 Invest Online
  6. IDFC Tax Advantage (ELSS) Fund Invest Online
  7. SBI Magnum Tax Gain Scheme 1993 Invest Online
  8. Sundaram Tax Saver Invest Online
  9. Edelweiss ELSS Invest Online

------------------

Best Performing Mutual Funds

    1. Largecap Funds Invest Online
      1. DSP BlackRock Top 100 Fund
      2. ICICI Prudential Focused Blue Chip Fund
      3. Birla Sun Life Front Line Equity Fund
    2. Large and Midcap Funds Invest Online
      1. ICICI Prudential Dynamic Plan
      2. HDFC Top 200 Fund
      3. UTI Dividend Yield Fund
    1. Mid and SmallCap Funds Invest Online
      1. Reliance Equity Opportunities Fund
      2. DSP BlackRock Small & Midcap Fund
      3. Sundaram Select Midcap
      4. IDFC Premier Equity Fund
    1. Small and MicroCap Funds Invest Online
      1. DSP BlackRock MicroCap Fund
    1. Sector Funds Invest Online
      1. Reliance Banking Fund
      2. Reliance Banking Fund
    1. Tax Saver MutualFunds Invest Online
      1. ICICI Prudential Tax Plan
      2. HDFC Taxsaver
      3. DSP BlackRock Tax Saver Fund
      4. Reliance Tax Saver (ELSS) Fund
    2. Gold Mutual Funds Invest Online
      1. Relaince Gold Savings Fund
      2. ICICI Prudential Regular Gold Savings Fund
      3. HDFC Gold Fund

Popular posts from this blog

ULIP Review: ProGrowth Super II

  If you are interested in a death cover that's just big enough, HDFC SL ProGrowth Super II is something worth a try. The beauty is it has something for everybody — you name the risk profile, the category is right up there. But do a SWOT analysis of the basket, and the gloss fades     HDFC SL ProGrowth Super II is a type-II unit-linked insurance plan ( ULIP ). Launched in September 2010, this is a small ticket-size scheme with multiple rider options and adequate death cover. It offers five investment options (funds) — one in each category of large-cap equity, mid-cap equity, balanced, debt and money market fund. COST STRUCTURE: ProGrowth Super II is reasonably priced, with the premium allocation charge lower than most others in the category. However, the scheme's mortality charge is almost 60% that of LIC mortality table for those investing early in life. This charge reduces with age. BENEFITS: Investors can choose a sum assured between 10-40 times the annualised premium...
Read more

Am you Required to E-file Tax Return?

Download Tax Saving Mutual Fund Application Forms Invest In Tax Saving Mutual Funds Online Buy Gold Mutual Funds Leave a missed Call on 94 8300 8300   Am I Required to 'E-file' My Return? Yes, under the law you are required to e-file your return if your income for the year is Rs. 500,000 or more. Even if you are not required to e-file your return, it is advisable to do so for the following benefits: i) E-filing is environment friendly. ii) E-filing ensures certain validations before the return is filed. Therefore, e-returns are more accurate than the paper returns. iii) E-returns are processed faster than the paper returns. iv) E-filing can be done from the comfort of home/office and you do not have to stand in queue to e-file. v) E-returns can be accessed anytime from the tax department's e-filing portal. For further information contact Prajna Capit...
Read more

Section 80CCD

Top SIP Funds Online   Income tax deduction under section 80CCD Under Income Tax, TaxPayers have the benefit of claiming several deductions. Out of the deduction avenues, Section 80CCD provides t axpayer deductions against investments made in specific sector s. Under Section 80CCD, an assessee is eligible to claim deductions against the contributions made to the National Pension Scheme or Atal Pension Yojana. Contributions made by an employer to National Pension Scheme are also eligible for deductions under the provisions of Section 80 CCD. In this article, we will take a look at the primary features of this section, the terms and conditions for claiming deductions, the eligibility to claim such deductions, and some of the commonly asked questions in this regard. There are two parts of Section 80CCD. Subsection 1 of this section refers to tax deductions for all assesses who are central government or state government employees, or self-employed or employed by any other employers. In...
Read more

Bharat Bond ETF

Top SIP Funds Online   The government of India has paved the way for the launch of India's first corporate bond ETF called as Bharat Bond ETF. Edelweiss Mutual Fund will be managing it. The fund is mandated to invest in AAA-rated bonds of select public sector companies (see the table 'List of constituents and their proportions in the portfolio'). The government has a threefold objective behind launching this product. One, to deepen the liquidity of the Indian debt markets and provide a gateway for easy retail participation. Two, to solve investors' dilemma of picking premium bonds. Lastly, to help the underlying government-owned companies raise funding for their operations. But does it make sense for you, the investor, to invest in it? Lets find out. What is the product? As the name suggests, it is an exchange-traded fund which will be listed on a stock exchange from where its units can be bought and sold post launch. It will have two variants - one maturing in 3 ye...
Read more

What is Electronic Clearing Service (ECS)?

  As the name suggests, it's an electronic process through which money can be transferred from one bank account to another. According to RBI, this mode is usually used for regular payments and receipts, like distribution of dividend, interest, salary, pension etc. This mode is also used for collection of bills for telephone, electricity, water, various types of taxes, payment of EMIs , investments in mutual funds , payment of insurance premium etc. There are two types of ECS , like most other banking transactions, ECS credit and ECS debit. An ECS credit is used by a bank account holder , usually a large company or an institution for services like payment of dividend, in terest, salary, pension etc. If your mutual fund pays you dividend to your bank account, of all probability it is being paid through ECS credit.ECS debit, on the other hand, is used when a company or an institution is getting money from a large number of people. For example if you are investing in a mutual fund sc...
Read more
Related Posts Plugin for WordPress, Blogger...
Invest in Tax Saving Mutual Funds Download Any Applications
Transact Mutual Funds Online Invest Online
Buy Gold Mutual Funds Invest Now