GST rollout, launch in India: Here are some impact areas on all household budgets right from purchase of a house to furnishing of the house and purchase of other necessities:
Updated: June 30, 2017 2:38 PM | Financial Express
GST rollout, launch in India: Finally, India is on the verge of witnessing a historic change from its current indirect taxation regime to the Goods and Services Tax (GST) regime with effect from 1 July 2017, with a grand ceremony on the night of 30 June 2017. Even though Congress, TMC and some other political parties have decided to boycott the event, it is going be a grand affair with PM Narendra Modi as the star speaker. The event will start at 11 pm on June 30.
GST aims at eliminating the multiplicity of taxes and removing cascading of taxes which leads to a higher tax incidence on customers today. With an intent to curtail the inflation, the Government has taken various measures viz. finalization of rates which are aligned to existing rate structure for most items and introducing an anti-profiteering clause in the GST law.
Here are some impact areas on all household budgets right from purchase of a house to furnishing of the house and purchase of other necessities:
Impact on renovation/construction budget of your house
Currently, in a typical construction contract, contractor’s price includes heavy incidence of Central Excise duty, Entry Tax, Central Sales Tax on material and Service tax on services used in construction which is ultimately passed on to customers in the form of higher prices.
The contactors shall have to pass on the benefits of lower tax burden under the GST regime to the customers by way of reduced prices as the contractors will be eligible for credit of GST paid on the material and services used in construction.
This benefit on account of GST will positively impact the budget on common households.
Impact on interior decorator services
Interior decorator services to get dearer by 3% since GST will be charged at 18% vis-à-vis current Service tax rate of 15%.
Impact on loan processing charges of banks
GST will be applicable on financial services, at 18 per cent vis-à-vis the current Service tax rate of 15%. Be ready to shell out more money as taking loans is going to get expensive.
Also, along with expenditure on upgradation of house, you might also want to invest in latest technology or home furniture. GST will have a bearing on the prices of such goods as well.
Impact on Electronic Appliances
Currently, the average tax incidence on most of the electronic appliances/ items is approximately 25-26% (including CST and other local taxes). GST on household electronic appliance like fridge, washing machine, vacuum cleaner etc. has been fixed at 28% under GST. Likely increase in the tax burden of customer by 2-3%.
Also, electronic segment faces stiff competition with a lot of new players and less established brands who are mostly based in excise-free zones and are awaiting clarity on how the present excise exemption will work, post GST. Therefore, impact on the products of such players may be known only after a few months.
Impact on other items
Common household furniture, mattress to attract higher GST rate of 28%. Positive impact on LEDs and carpets due to a lower GST rate (please see below).
Impact on daily necessities
There should not be any inflationary impact on account of GST on daily necessities as most of the items viz. unprocessed cereals like rice, wheat, essential items like milk, vegetables have been specifically exempt from GST.
All in all, GST should impact the household budgets in a positive manner, not only from a rate perspective but also on pricing of various products, albeit in a long run.
*Rates mentioned above are basis the general rate available for such category of products and for illustrative purposes only. Actual rates may vary depending upon the specifics of a product and state wise VAT rates.
(By Achal Chawla, Tax Partner, EY India. Views expressed are personal)
Manju AB | Monday, 1 June 2015 – 7:00am IST | Place: Mumbai | Agency: dna | From the print edition
Helps banks frame a strategy to sell financial products, have tie-ups with retail stores or simply entice with a good deal so that a good customer transfers his/her loan account.
Ever wondered why you are getting calls offering personal loan? Why personal loans are being sanctioned to you instantly? Or why you get inundated with calls for a credit card even if you don’t need them?
The answer is banks are engaging in data mining, where they analyse customer’s profiles and behaviour. They even track down your favourite restaurant, your eating habits, shopping preferences, movies you watch, books you read, the hospital visits you made; in fact, just anything about you.
Your loan repayments too are intensely scrutinised. These informations help banks take a quick call whether to offer you a loan or deny one, and effectively check bad loans. It also helps banks frame a strategy to sell financial products, have tie-ups with retail stores or simply entice with a good deal so that a good customer transfers his/her loan account.
A senior SBI official said, “We compile such customer data which help us decide on how to sell our insurance, mutual fund products or lure one customer to bank with us or have more than one relationship with an existing customer. Suppose a customer has a savings bank account with us and a home loan with another bank we try to woo the customer to shift his loan account.”
According to Harshala Chandorkor, senior vice-president, Consumer Services and Communications at Credit Information Bureau (India) Ltd (CIBIL), “Banks are engaging in data mining to understand the profile of their customers and understand the health and behaviour of their portfolio. It helps them to deepen their relation with existing customers, enhance credit limits on your credit cards, deny credit cards if your credit history is poor and have tie-ups with retailers. We at CIBIL undertake data mining to understand the profile and behaviour of the customers which help banks to define their strategies.”
The bank has a data mining centre in Belapur, Navi Mumbai. With strict KYC (Know your customer) norms in place, banks get all the basic information from the customers themselves. And often customers with a savings account will be having a debit card, a credit card, a home loan or a car loan. Each time your card is used your bank gets a feedback of what you do with your money.
All banks, especially those in private sector, undertake data mining to understand the customer better before marketing various financial products to them and to avoid bad loan decisions. Tie-ups with online retailers are also undertaken considering the customer profile. HDFC Bank debit card has offers on various travel portals, and jabong and ebay. Banks like ICICI and HDFC are active in making calls to sell credit cards and personal loans.
For example, SBI debit card has tie-up with LG and other traders that the bank markets it as a 24×7 market place; ICICI Bank has tie-up with Shoppers Stop, Flipkart etc. Thus, each bank, depending on the kind of customer profile, will go in for tie-ups with merchant establishments who, in turn, will give discounts on the bank’s credit, debit cards.
A senior banker with Union Bank of India said, “We regularly monitor our savings bank customers to find out from where they may have taken a home loan or a car loan. And try to find out how the bank could not have caught the customer. His relationship with the bank cannot just be a savings bank account. It makes sense for the bank to have more than one relationship with the customer.”
Source : http://goo.gl/7SKAuG
Harshala Chandorkar | Updated On: May 25, 2015 10:32 (IST) | NDTV Profit
Easy and hassle free availability of finance in the form of loans and credit cards is perhaps the biggest advantage that today’s generation has. This easy access to finance has made the potential of realising dreams a certainty, be it a dream to pursue higher education or to buy a dream home. But this opportunity must be used with utmost restraint and caution.
Take for instance the situation of Shreya, a 27-year old financially independent woman who works in an MNC. Like any other twenty first century youngster, she has her own share of aspirations and wanted to gift herself a swanky new car for her upcoming 28th birthday. However, when Shreya applied to a bank for an auto loan for fulfilling this aspiration, it was rejected. The reason for rejection was Shreya’s low CIBIL TransUnion Score due to a delinquent CIBIL Report. What Shreya did not consider was her past behaviour on the loans and credit cards she had taken. Shreya was already servicing bills on four credit cards and EMIs on consumer durable loan which she had taken to buy the latest phone. She had been missing payments on 2 of her credit cards for over 6 months and had also defaulted on her monthly instalments on the consumer durable loan on three instances. This reckless credit behaviour had impacted her CIBIL TransUnion Score and thereby hampered her dream of driving her own car on her birthday.
Shreya’s predicament is shared by a lot of youngsters today. Taking any kind of loan is a serious financial commitment and needs some amount of discipline. And although today banks may seem eager to lend, there are certain important things you need to consider to avoid any surprises and disappointments while applying for a loan which ultimately hamper your financial goals.
Here are a few tips for ensuring you have access to finance for fulfilling your future aspirations:
1. Maintain a healthy CIBIL TransUnion Score:
Your CIBIL TransUnion Score is one the most crucial parameters for being “finance ready”. Banks and credit institutions check your CIBIL Report and CIBIL TransUnion Score along with your income for deciding on your loan or credit card application. Therefore you must ensure that you maintain a healthy credit history and thereby a good CIBIL TransUnion Score.
What hampers your CIBIL Report and CIBIL TransUnion Score is missing an EMI or credit card bill payments and delay in payments. For building and maintaining a good CIBIL TransUnion Score you must maintain a healthy credit history through:
- Keeping a track of all your loan EMIs and credit card expenditures and planning finances in advance each month for servicing the loan/s and paying credit card bills
- Ensuring you make payments of your credit card bills and loan EMIs by or before the due date month -on-month.
- Reviewing your credit report regularly to keep a tab on your credit history and CIBIL TransUnion Score.
2. Chalk an aspirational roadmap
While servicing your loans and managing household expenses and other financial commitments, one tends to forget planning for future aspirations. Chalking out a roadmap of future aspirations and the cost estimate required for fulfilling each of these aspirations is the first step towards attaining them. Once you have chalked out this roadmap you need to carefully plan your expenses and loan payments and ensure that you save money for aspirational milestones according to the roadmap. Consistently saving money in growth plans, fixed deposits and other safe saving instruments will ensure you will have capital required to attain your aspirational milestone at the desired stage in life.
3. Save for the rainy day
While diligently saving for your future aspirations, do not forget to keep aside funds for contingencies. Life is full of uncertainties and unfortunate situations or unforeseen financial losses like illnesses, natural calamities or job losses can catch you off-guard and hamper fulfilment of your aspirations. Therefore it is critical to ensure you save some money or buy insurance coverage for facing such situations confidently.
Wise planning and financial discipline will help you achieve your financial aspirations and goals with ease.
(Harshala Chandorkar is Senior Vice President-Consumer Services and Communications at CIBIL)
Disclaimer: The opinions expressed within this article are the personal opinions of the author. The facts and opinions appearing in the article do not reflect the views of NDTV and NDTV does not assume any responsibility or liability for the same.
Priya Nair | May 18, 2015 Last Updated at 00:10 IST | Business Standard
Be prepared to pay more if travelling abroad or if your child is studying there. Other impacts can be varied
Your family and you are flying to the US next week on holiday. Flight tickets and hotel bookings were done in advance. So, why should the rupee depreciation bother you? It should because all other expenses, such as sightseeing, local transfers and food will increase as a result of the fall in the rupee.
Similarly, if your child is studying in a foreign university, don’t be surprised if tuition fees increase substantially over last year.
There are also some advantages of a falling rupee. Those working abroad will gain, as the same amount they remit will translate into more rupees.
“It looks like the rupee will be in the 64-65 range (to the dollar). As the rupee tends to be overvalued and exports are not growing much, the Reserve Bank might be willing to let the rupee depreciate,” says Madan Sabnavis, chief economist, CARE Ratings.
The immediate impact will be on foreign travel and students studying abroad. The indirect impact will be on other expenses, too, as oil prices will go up and this could push up prices of other commodities. However, this time, as the price of crude oil in the international market is low, there might not be much of an impact on domestic oil prices, says Sabnavis.
Below is a look at some ways a weaker rupee will impact your life and what you can do about it.
Europe tours are popular with Indians in the summer months of April to June. Most people book in October for departures starting in April. Those who have booked and paid earlier, including the forex component, will not feel much of an impact. However, travellers who don’t pay the forex component in advance might feel the pinch. Usually, travellers pay the deposit and for flight tickets in rupees, in advance. The forex component, which covers accommodation, meals, sight-seeing and excursions, can be paid later. “For trips in April, packages are booked as early as October. We pushed many of our customers to pay in advance. Those who did not pay then might feel the pinch now,” says Daniel D’Souza, head of sales, Tour Operating, Kuoni India.
One way to avoid last-minute heartburn is to pay for your entire package in advance and not only the rupee component. If booking last-minute, choosing a short-haul holiday to a destination closer to home rather than a long-haul holiday is also a way to save some costs.
Tips to save
- Reduce the number of days from 10 to, say, eight
- Reduce the number of excursions
- Switching to a lower category hotel or staying in a bed and breakfast or home stay
- Cut on shopping rather than sight-seeing, since it is the experience that matters
- Opting for public transport such as trains, subway or buses, rather than renting a car
- While sightseeing, choose days when tourists are allowed to go for free or given discounts. Most monuments abroad have such days
- While shopping, buying from flea markets can work out cheaper than from stores
- Take a decent amount of cash with you, as you might not get good rates while travelling
- Pre-paid travel cards that allow you to load multiple currencies are a good option. In these cards, the value of the rupee is of the date the money is loaded to the card
Students studying abroad also suffer when the rupee falls. The US, Britain, Canada, Singapore and Australia are popular countries for Indian students. The university will not offer any leeway in tuition fees. Students will have to pay the entire amount. In most cases, you will have to pay before a term starts.
Given the high tuition fees in foreign universities and the cost of living, most students take some loan and pay for the rest by scholarships or taking a part-time job. “When the rupee falls, it becomes difficult for the entire family, not only the student. And, not many individuals know how to hedge themselves against currency fluctuations by using derivative products. What you can do is try and pay the entire fee upfront when the exchange rate is low. Most universities give a discount of one or two per cent if you do so,” says Naveen Chopra, of The Chopras, a foreign educational consultancy.
Neeraj Saxena, chief executive, Avanse, a non-banking financial company that gives education loans, says there is an option to enhance the loan amount during the course. “We don’t usually disburse the full loan amount at one go. We do as per the semester. So, if the fees increase in the third semester, we can increase the loan amount,” he advises.
Saxena suggest students going abroad should look for scholarships or part-time jobs like teaching assistantships. “We find of the Rs 30-35 lakh required for a foreign university course, students often are able to earn Rs 8-10 lakh through part-time jobs, which pay by the hour,” he says.
Tips to save:
- Using discount coupons given by universities and accepted at all major stores
- Using cards like the ISIC (a specialised card for students) for travelling, eating out, even shopping at some departmental stores
- Going for free concerts, to movie halls which offer student discounts
- Going to budget pubs, during happy hours, for leisure
- Use special cards that offer discounts to students for eating out and shopping
The rupee’s weakness will push up medical costs, too. About 30-40 per cent of a hospital’s cost is on account of medical equipment and of these, 80 per cent is imported, says Vivek Desai, managing director, HOSMAC, a health care management consultancy. “Many common procedures in cardiology and cancer care use imported equipment. Even orthopaedic implants and consumables used in laboratories are imported. Any increase in their costs will be passed on to patients and there is nothing the latter can do about it. That is why medical insurance is a must. That, too, comes with a ceiling,” he says.
Other costs like air-conditioning and flooring in hospitals, also imported, will also see an increase and hospitals are likely to pass these on to patients by way of higher charges.
Patients going abroad for treatment will also see an increase in cost due to the rupee’s fall.
Tips to save:
- Health insurance is one way you can deal with rising medical costs. Buy one early in life
- Even if covered under your employer’s group medical insurance, take a separate family floater
- Buy a top-up medical insurance to increase your sum assured without too much increase in premium
A weak rupee will benefit
Non-resident Indians (NRIs) sending money home will benefit from the rupee’s weakness, as they will get more returns for what they send. Typically, NRIs with higher disposable incomes send more money to India when the rupee falls, says Sudesh Giriyan, chief operating officer, Xpress Money. “We will see an increase in remittances when the rupee crosses 64 to a dollar. In the case of cash remittances, we don’t see much increase because these are smaller ticket-size. But in direct remittances, which are bigger ticket-size, currency value has a bigger impact,”
Many NRIs also take loans from banks abroad, since the interest rates are lower, and remit money to India in order to invest, he adds.
There is usually an increase of seven to 10 per cent in remittances on account of rupee weakness, says K A Babu, head-retail and NRI banking, Federal Bank. Remittances from the Gulf countries tend to increase in such times than those from elsewhere.
With regard to investments, those from the lower income group prefer bank fixed deposits – NRE rupee deposits or FCNR deposits which are in foreign currency. The NRE deposits offer the same rates as domestic FDs and can be liquidated easily. The FCNR deposits will provide protection from exchange rate volatility, though the rates are lower.
“Ideally, investors should have a mix of both kinds of deposits. That way, they can earn high interest rates and also get a hedge from currency fluctuation,” Babu says.
For NRIs in the high income segment, banks and wealth management firms offer portfolio management services, through which they can invest in stocks, PMS schemes, mutual funds, fixed income products, real estate, etc. The preference is usually for land or residential property. Some NRIs might also look to expand their business in India and buy commercial property.
International equity funds that invest abroad will benefit from the fall in the rupee. Investors of such funds would have seen their portfolios rise in the past few months. According to data from Value Research, over the past three-month period, returns from international funds have been the highest at 6.19 per cent, while equity multi-cap funds have seen their returns fall 3.19 per cent.
But these gains are marginal and should not be the only reason for investing in international equity funds. For instance, over a one-year period, multi-cap funds have given returns of 34.84 per cent, while in the case of international funds, it is 7.78 per cent.
The US market is currently doing well and will definitely give better returns in the near term, as it will not be as volatile as the Indian equity market. But over a longer term, that is a five-year period, Indian equities will definitely give better returns. So, one can look at international funds provided they have sufficient exposure to Indian equities, say experts.
Anand Radhakrishnan, chief investment officer at Franklin Equity, Franklin Templeton Investments – India, also says investors should not look to time the markets, but invest on a regular basis and in a systematic manner. “Typically, the exposure would depend on the individual’s risk profile and investment objective, but as a thumb rule, one should have at least 20 per cent of their investment portfolio allocated to international assets. Equity investments warrant a longer investment horizon and we recommend investors come in with a three-to-five year horizon or more,” he says.
Source : http://goo.gl/SUyRgr
RAJIV RAJ Founder & Director, Creditvidya.com | May 15, 2015, 10.01 AM IST | Source: Moneycontrol.com
Many individuals do carry stack of credit cards, which they may never use or may overuse all of them leading to repayment issues. It is better to analyse one’s needs and decide the right number.
The other day, while a friend was paying the bill at the mall counter, he said, “I hardly carry cash anymore you know. Just some loose change maybe. It’s all on my cards.” While I looked at his fat wallet which was stashed with so many cards, I wondered. How many credit cards are too many or too less?
Many people and specially the youth have already declared that this is the age of plastic money. Credit card companies took it upon themselves to ensure that it indeed is! Every day we are bombarded with advertisements and lucrative offers. Credit cards are just a call away. The documentation and application process is made simple and hassle-free to attract more customers. Effectively companies are flocking to lend you money! So what do you do? How does your decision affect your CIBIL score?
Too many cards, too many outlets for money!
If you have hoarded many credit cards, it also means you have multiple options for swiping. To encourage customers to gather reward points, card companies are constantly coming up with offers. Now, it’s difficult to ignore these deals. Many a time, the deal seems so enticing that we end up swiping the card for it. Which basically means, that you ended up making a purchase because you had a card with an offer on it! That is definitely less than a wise way of spending money.
So what should you do?
Nobody understands your requirements better than you do! Over the weekend spread out all your cards on the table and sit with a cup of green tea. With a calm mind, evaluate the need for having each card independently. There may be cards which you purchased because somebody asked you to or a card bought for the reward point’s scheme on it, etc. Segregate those from the cards which you use often. Now calculate the cumulative credit limit you have. Cross check that with your expenses. Ensure you add up some amount for emergency expenses or large expenses which you foresee in the near future. That would basically be all the credit limit you need on the card. Add on a buffer for feeling safer and that’s about it.
Pick and choose!
It’s time to make smart choices. Check up on annual fees on the credit card, interest rates applicable, reward point schemes, etc against the credit limit offered. Select the ones which best suits your needs. You already have an idea of the total credit limit you need. That’s it. You will arrive at your own magical number. Discard rest of the cards and have a lighter wallet and a clearer mind.
How does this impact my CIBIL score?
CIBIL score reflects your credit history and financial discipline. That means, first of all you need to have a credit history. That’s where credit cards can help you. Availing a credit card gives you a credit history. This can help you while applying for a loan. Next up is the financial discipline bit which basically means tracking your payments due. If you have been making your payments on time and not having a defaults history then your CIBIL score would be shining. Another factor which is considered while preparing the CIBIL report is the utilization. Only having a credit limit is not enough. You should be utilizing it optimally as well. Exceeding 30% credit utilization ratio during a billing cycle could do damage.
Play your cards by the rules!
There is no better way to influence your CIBIL score than imbibing financial discipline. Make sure you pay off your credit card due amount every month. This will not only shield you from high interest rates applicable on credit card money but also impact the CIBIL scores positively. Obviously, the more the number of credit cards, the more discipline you require. Tracking and paying off on time is important. Secondly, keeping a check on the credit utilization ratio with too many cards in the hand is difficult. With fewer cards and planned spending this tracking can be a cake walk. And of course, one that will ensure sweet CIBIL scores.
So what’s the magical number?
That is up to each one of us to figure out after considering all the factors mentioned above. If we had to give a number, it should be something between three to five. Two card which you can use regularly and an additional one for emergencies will do just fine. Also, managing 3 cards is relatively simple. All you have to do is establish the 30% spending limit and use the cards accordingly. Needless to say while making timely payments. Two additional cards can be availed if you travel for work or have a particular expense on which you spend frequently like flights, fuel etc. These cards can be specifically used for the determined purpose.
Now that you are equipped with all the insights on credit cards, it’s time to say goodbye to the stack and hello to fewer cards and effectively utilization. Use plastic money to make your life easier and your bank balance heavier. Planning and discipline is the key.
RAJIV RAJ | MAY 11, 2015, 02.28 PM | Business Insider
Credit card rewards can be very tempting and can lure card holders to spend money which they otherwise wouldn’t have. What happens then? You end up spending more money than what the reward is worth! Such spending decisions taken under the influence of a reward temptation can be a bad idea for your wallet. Moreover, there are chances that you were not required to make that purchase at all. You may have done it only for the reward. Expensive carrots indeed! Here are 7 situations when credit card rewards can actually backfire.
1) Here redeem your rewards, but first open your wallet!
Rewards points accumulated can be redeemed as per the card company’s policies. This typically includes spending at specified outlets, brands, miles or cash back. Once you know that you have accumulated the reward points there is an urge to redeem and benefit from it. This urge pushes us to think of ways to redeem which includes going in for purchases which are not required! Whether it’s shopping for clothes, accessories, travel plans or dining out, decide to spend on these activities only if they were a part of your plan anyway. Planning to spend for redeeming rewards is not a good idea.
2) Chasing rewards?! They are watching you.
Often friends and family talk about the “amazing” credit card they have signed up for. Their stories of saving money, claiming air miles and access to exclusive lounges lure us into going and checking out what the deal was about. Not denying that it may be a good deal, but stop before you decide to sign up. Having a bunch of “amazing” credit cards, signed up primarily because they have good rewards scheme can prove detrimental for your CIBIL score. Banks can view you as a credit risk if you aren’t organized while picking credit. Credit utilization and repaying on time is a task which requires a good tracking system. If your tracking system is not in place it is possible that you miss out on repaying or end up spending more than you intended to. Your wallet and CIBIL report, both will be affected as a result of the reward chase.
3) Mind your score!
Reward credit cards have a higher rate of interest. If that is the choice you have made then redeeming the reward points will definitely be on the list. However, while availing rewards you may end up spending more money. The repayment of which, if missed can lead to paying a heavy interest rate. Moreover, these delayed payments can negatively impact the CIBIL score. Now the last thing you need after ending up spending more money is a drop in the CIBIL score!
4) I don’t need it but let me buy my reward!
Credit card offers can be generous deals. The best offers are generally up to 5% of the value spent as reward in some form or the other. Now if you are making a purchase with an eye on this offer, then you are in trouble. Spending 95% of the money on an unnecessary purchase is far from being wise about spending. Availing the reward should be a bonus on the purchase and not a reason for the purchase.
5) Did you see the fee?
Reward cards charge a considerable annual fee. While we sign up for the cards, enticed by the rewards, the annual fee is often ignored. It is important to evaluate the total worth of the rewards as against the annual fee applicable. Are the rewards another reason for you to spend more? Does redeeming the rewards means planning for unwanted purchases? Answer these questions for yourself to know if the credit card rewards are actually helping you save. If not, look out for options with lower or no annual fees and do away with unwanted temptation to spend more for redeeming reward points.
6) Watch out if you are shopping for more debt!
If you already have a credit card with a credit limit which is utilized regularly and timely repayments are being done then you are in the right zone. This approach will help you max out the benefits of using a credit card while positively keeping up your CIBIL score. Don’t let greed take over and make you hunt for reward cards. While the immediate benefits like signing up bonuses and short term benefits like using a certain amount within a limited period of time in return for reward points may appear lucrative, it is a bad idea in the long run. You are actually taking on more debt even though you don’t need it! We definitely don’t need to find newer avenues to part ways with our hard earned money.
7) Focus on your goals more than the rewards!
To stay out of trouble and sail smoothly it’s important to stick to your personal financial goals. A part of this plan is sticking to budgets every month. Major expenses are planned and money is set aside for such expenses beforehand. Credit card rewards can prove distracting while you are trying to stay focused on planned spending. To avail rewards, we convince ourselves to get off the budget plan. Bad idea! The thrill of availing the reward not only takes us off the road leading to our financial goals but also drills a hole in our pocket. So remember, goals over rewards any day.
Credit cards when planned and used can indeed help us save and give us access to money when required. However, using cards to accumulate reward points and then planning ways to redeem them is not a great idea. Focus on your financial goals, plan your expenses and aim to save. Keep off those credit card reward carrots!
About the author: Rajiv Raj is the director and co-founder of http://www.creditvidya.com.
Source : http://goo.gl/dtH5bW
Harshala Chandorkar | Updated On: April 22, 2015 18:31 (IST) | NDTV Profit
(Harshala Chandorkar is senior vice president-consumer services and communications at CIBIL)
It’s that time of the year when the day starts becoming longer, the scorching Sun gets harsher, schools take a break and mangoes signal the onset of summer. It’s also that time when parents scout for last minute travel deals to locations far off from the summer heat.
Mayank and Neha had been planning a short summer vacation for their 5-year-old daughter Kiara. After scouting through various travel websites, Neha finally arrived at the best deal for her family, which not only gave her an attractive discount on hotel stay but also a 15 per cent cashback on credit card – a deal that would save her family a substantial amount.
But Mayank was not too keen on swiping the credit card and rather preferred paying outright cash. His displeasure came from an earlier experience when he set out on a trip with his childhood friends – his last time as a bachelor. Having swiped his credit card for the trip, Mayank forgot to pay that month’s credit card bill in the entire melee of post-trip excitement and wedding thereafter, thus adversely affecting his credit score.
After deliberating and debating, Neha and Mayank finally decided to swipe the credit card to pay for the holiday. Mayank, however, put down some ground rules on credit card usage so that it does not adversely impact their credit reports and CIBIL TransUnion scores:
- Decide a budget and stay within that: Mayank and Neha chalked out the total budget of the holiday down to the daily meals, holiday shopping and commuting costs. It was mutually agreed to stay within this budget to avoid any undue expenses.
Avail travel insurance: The two of them also sought to purchase considerable travel insurance coverage to be on the safe side in case of loss of baggage or theft during the holiday.
Set payment alerts: They activated and ensured alerts were kept for payment of all the credit card bills – both on phone and on emails – before the due date. Late payments are negatively viewed by lenders because this indicates that you are having trouble servicing your existing obligations.
High utilisation of credit limit: While increased spending on the credit card will not necessarily affect one’s credit score, an increase in the current balance of your credit card indicates a higher repayment burden and may negatively affect your credit score. It’s always prudent to not use too much credit. Mayank and Neha mutually decided on a credit card spending cap way lower than the limit on their credit card.
Ensure timely payment: They committed to make regular and timely payments of the credit card bill in full every month. Paying off dues before the due date every month is the best way to avoid credit card debt.
Review credit report: They also accessed their credit reports before jet-setting on the holiday to ensure that their credit history was up to date and they both had a good credit score.
Mayank was prudent and had learnt from his past mistakes wherein he was callous and not financially responsible. Many tend to make the same mistake Mayank made in his younger days. Better late than never. By using financial prudence while planning for your summer holiday you can ensure that you have access to finance for all your future aspirations.
Disclaimer: The opinions expressed within this article are the personal opinions of the author. The facts and opinions appearing in the article do not reflect the views of NDTV and NDTV does not assume any responsibility or liability for the same.
Source : http://goo.gl/ZKpNCv
Creditvidya.com | Updated On: April 11, 2015 14:11 (IST) | NDTV Profit
If you take a quick look at your finances, it may seem like everything is in order. From a distance, your finances may appear to be devoid of any discrepancies: You have a steady income and manage to pay off your mortgage/credit card bills on time and also have that extra bit to splurge on each month. However, a closer look may reveal that you are actually making several money mistakes that may lead to disastrous consequences in the days to come.
Let’s take a look at some of these mistakes:
1) Treating home loan as just another ‘to do’ item
If you have taken a home loan, just paying EMIs on time isn’t enough. You must keep an eye on the interest rate cycles and ensure that you are in touch with your lender on a regular basis. Putting your home loan on a backburner may mean that you are missing out on big monthly savings.
2) Putting away the task of checking credit score
Most of us are guilty of some procrastination, but this is one habit that may cost you dearly. Do not wait to check and improve your Cibil score only when you are planning to apply for a crucial loan. Keeping a tab on your Cibil report from time to time to see that your financial health is in order is a good practice.
3) ‘Retirement savings can wait’
When you are young and have good prospects in your career, you may have a feeling that it is too early for you to start planning your retirement. This is, however, a crucial mistake because you are ignoring the benefits of compounding and also missing out on having the safety net of your own contributions. The later you start saving for your retirement the costlier it gets for you.
4) ‘Medical insurance is a waste’
You may be in perfect health now, but there is no saying when calamity strikes. That is exactly the reason why you need to invest in a good health plan. In case a medical emergency occurs, you may end up wiping off all your savings at one go.
5) No savings for a rainy day
When the going is good, people think that they can put away their savings for a later day. But what if there are unforeseen events in the future like a job loss or a large, unexpected expense? If you do not have a pool of savings to dip into at such times, you may end up making huge expenses on account of emergencies on your credit card. This may inflate your debt burden into an unmanageable size in the future. Making sure that you have put away at least three to six months of your monthly expenses as savings all the time is a healthy practice.
Maintaining a good financial health is as important as physical health. By keeping these five points in mind, you can ensure that your financial health is in order.
Disclaimer: All information in this article has been provided by Creditvidya.com and NDTV Profit is not responsible for the accuracy and completeness of the same.
Source : http://goo.gl/SEqSMN
By: CreditVidya | New Delhi | April 14, 2015 5:02 pm | Financial Express
Bad financial habits getting the better of you? Do you constantly berate yourself over your money habits? Those quirks you develop sometimes can become lifetime companions paving the way to financial ruin, if not worse. If you don’t recognize bad financial habits in time, you run the risk of losing a lot of money and damaging your Cibil score in the process – a bad Cibil score means you will not have access to credit when you require it.
Here is a list that can serve you well:
1. Not budgeting your spend
A simple way to control your expenses is to start budgeting your spend. There are some mandatory payouts you need to make in a month, but what about your other expenses? Is there a scope of cutting your spend there?
When you make a budget and mark out categories there, you will find there are places that you are overspending. More often than not it is in categories such as entertainment or shopping. Tracking your expenses over time will show you the problem areas after which you should make a few conscious decisions to cut down on unnecessary expenses.
2. Going overboard with the credit card
As easy as it is to use your credit card, it may lead you into a debt trap that is not easy to get out of. Many people give into the temptation of buying things they cant afford by using their credit cards. As a result they are unable to make repayments on time. Credit cards are the most expensive form of debt as the annual percentage rate of interest on them is as high as 36-40%. Credit cards should therefore never be used to fund your desires. On the other hand, if credit cards are used judiciously each month, and repaying the outstanding amount in full, it may lead to a stellar Cibil score.
3. Dipping into emergency funds
Financial planning wisdom suggests that every person should have an emergency fund that should see him through at least three to six months. If you have created an emergency fund and dipping into it now and then, it will be of no use to you when an emergency really crops up. Therefore make it a conscious habit to put in a bit of your earnings away in an emergency fund each month. If you get a bonus or a monetary gift sometime, make sure a large share of it is directed towards this emergency fund. That is called being prepared for a rainy day!
4. Buying things to make yourself happy
There are a lot of businesses out there that are making money because you like to binge. This is not to deride the fact that India is called a “consumption” led economy, but give it a careful thought. Do you buy things to uplift your mood, or just because you are bored? If that is so, you are perhaps consuming mindlessly to make yourself content, and sorry to sound philosophical, but material things cannot buy you happiness. Do buy yourself a nice thing or two once in a while, but make it habit to save more than you spend.
5. Waking up late
As bizarre as it sounds, waking up late can also have a negative impact on your finances. Imagine the number of times you have switched off that alarm button and gone back to bed and before you know it, there’s barely enough time to get to work! Now rewind and think what would have happened if you had not hit the snooze button on your alarm. In that extra hour that you would have gotten maybe you could exercise to give your day a jump start, do some long pending reading or get started on your plans to learn a new skill.
All these activities can directly or indirectly lead to a higher income. So instead of getting that coveted hour of sleep, fill in your morning hours with these activities and guess what, you will feel more productive than ever before. And as they say, “Early to bed and early to rise, makes a man healthy, wealthy and wise!”
Bad habits are not easy to get rid off, but with a bit of hard work and conscious efforts you can indeed get rid of them, especially when they are impacting your finances. If you have empathized with one or more of the above mentioned points its time for you to make the effort now! It may be painful for you to make these changes in the immediate short term, but inculcating good financial habits over time will lead to you saving more money over time as well as maintain a healthy Cibil score.
Source : http://goo.gl/OJIu7D