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Awareness Fridays: Can You Access Your Credit Information Report? (Part #2)

Vinaya HS — Fri, 03 Jul 2009 05:11:34 +0000

I’d raised a few questions when I last wrote about accessing your credit scores in India. A couple of days later, the Economic Times published an interview featuring Credit Information Bureau (India) Limited (CIBIL) addressing these very concerns. It’s a must read, especially if you’ve previously availed credit or are planning to.

Awareness Fridays is my initiative to spread awareness on topics relevant to personal finance — every Friday. I urge you to take some time off and absorb this information — it’s pretty useful. And, as always, do spread the word if you find this useful.

Further reading:

Case Study #4 — Why I Don’t Own a Credit Card?

Vinaya HS — Thu, 02 Jul 2009 05:09:10 +0000

I was curious to know why a friend of mine didn’t own a credit card — especially in this day and age. My friend’s response:

Haasige iddashtu kaalu chaachu (idiom for: I don’t want to spend money that’s not mine to begin with). Add to that the hassles of remembering payment due dates, amounts, etc. Throw in the risk of physically losing/misplacing the credit card (I don’t even want to talk about the virtual aspect). It’s very easy to fall into a strangling spiral of spending money that’s not yours. I’ve seen people turn into compulsive spenders just to recover the annual fee and to utilize offers; seen people shift to another bank that clears your existing credit and gives you even more (read: balance transfers); seen people exhaust the limit on one card and simply move on to the next one in their wallet. They aren’t a happy bunch today. When you can keep things simple — and yourself happy — with your hard-earned cash, why would you want to get into the mess of credit cards?

I do confess that I have been attracted to cash-back and point-redemption offers, but one look at the fine print and…I know that it’s not for me. Of course, there are certain drawbacks to not having a credit card; but when you own your choices you also own their consequences.

What do you think?

Further reading:

Tweets on 2009-07-01

Vinaya HS — Wed, 01 Jul 2009 06:51:28 +0000

A Unique Transaction Number (UTN) is not mandatory for filing income-tax returns this year.

Go ahead and file your income-tax returns.

Further reading:

Tip Tuesdays: The Cycle of Personal Finance

Vinaya HS — Tue, 30 Jun 2009 11:13:02 +0000

I think personal finance is a cycle of events and actions:

Identify your Financial Goals.
Outline a Strategy to achieve your Financial Goals
Pick Financial Instruments that execute this Strategy.
Monitor and take preventive/corrective actions when necessary.

Financial Goals => Strategy => Financial Instruments.

Any other sequence and the result is almost always financial disaster.

What do you think?

Tip Tuesdays is my initiative to share practical personal finance tips — every Tuesday. I’d be delighted if you could share a tip or two from your own experiences. Drop a comment to submit your tip. And, as always, do spread the word if you find this useful.

Further reading:

Awareness Fridays: Can You Access Your Credit Information Report?

Vinaya HS — Fri, 26 Jun 2009 09:48:28 +0000

I’ve previously written about the Credit Information Bureau (India) Limited (CIBIL). To repeat,

CIBIL or Credit Information Bureau (India) Limited is India’s first credit information bureau and is a repository of information, which contains the credit history of commercial and consumer borrowers. CIBIL provides this information to its Members (i.e. banks and other financial institutions) in the form of credit information reports.

But what about you? Can you access your own credit report? According to this recent circular issued by the Reserve Bank of India,

Any person, who applies for grant or sanction of credit facility, from any credit institution, may request such institution to furnish him a copy of the credit information obtained by such institution from the credit information company.

Every credit institution shall on receipt of such requests, furnish to such person a copy of the credit information subject to payment of charges.

A maximum fees of Rs 50 can be charged for this purpose.

It’s certainly a step in the right direction — and good for you if you’ve been thinking of availing credit, but what about those who’re not inclined to avail credit right away. How then does one access one’s credit information report? What about those who’ve already availed credit facility? Surely, they’d like to know their credit scores too. And what exactly does credit facility include? Is credit cards, loans (any type), and overdrafts an exhaustive list?

Raises more questions than it answers. What do you think?

Further reading:

CRM Horrors: A PIN is Just to Prick You

Vinaya HS — Thu, 25 Jun 2009 07:07:41 +0000

It’s no secret that I find HSBC quite lame. In spite of these, I still have a credit card from HSBC — simply because it’s the only credit card and credit card history that I have. Yesterday, I used my Telephone Banking PIN to check up on the outstanding balance. Normally, the call is fully automated, but yesterday, it was redirected to a human. Here’s a summary of our conversation. My thoughts/responses in [ ].

Apparently, the call was redirected in spite of my using my PIN just because HSBC had some “offers” to make. [WTF, mate.]

The first offer was some insurance scam from Tata-AIG. Seems I should take it even if I already have insurance. [I hate Tata-AIG. Thanks.]

The second offer was some EMI option for paying the outstanding balance. [I'm on the way to drop a check for the full amount. Thanks.]

The third offer was some Card Protection Plan. [I don't think my card needs any protection (pun intended). Thanks.]

Disappointment in voice. Hang-up.

What a totally lame bank.

Tweets on 2009-06-24

Vinaya HS — Wed, 24 Jun 2009 10:39:42 +0000

Yesterday, I talked about why it makes sense to have a higher basic pay as part of your salary? My friend and guest blogger Shilpa immediately took my calculations forward in order to determine what difference the basic pay would make to your take home salary.

Grab a copy of her calculations.

What do you think?

Thanks Shilpa. Do you still claim to know zilch about financial planning?

Further reading:

Tip Tuesdays: Why It Makes Sense to Have a Higher Basic Pay as Part of Your Salary?

Vinaya HS — Tue, 23 Jun 2009 05:19:53 +0000

Recently, at work, there was a restructuring of our salary components. Many concerns were raised when the outside consultants proposed that Basic pay be at least 50% of the Gross pay — it was finally fixed at 40%. I think we lost out. Here’s the math (all figures are per annum).

Suppose your Gross pay is Rs 500,000. At 50%, your Basic pay is Rs 500,000 x 50% = Rs 250,000. At 12%, your contribution to EPF is Rs 250,000 x 12% = Rs 30,000 (and which carries over fully as income tax savings). Your employer contributes an equal amount, taking your total contribution to EPF to Rs 60,000.

On the other hand,

At 40%, your Basic pay is Rs 500,000 x 40% = Rs 200,000. At 12%, your contribution to EPF is Rs 200,000 x 12% = Rs 24,000 (and which carries over fully as income tax savings). Your employer contributes an equal amount, taking your total contribution to EPF to Rs 48,000.

Observe closely. That’s a straight Rs 12,000 less in your automatic savings. You just saved your employer Rs 6,000. You also lost Rs 6,000 as part of your automatic income tax savings.

In general, the higher the Basic pay, the higher are these figures. Employer’s contribution to EPF is akin to free money. Why would you ever want to lose out on that?

And the gains? Rs 500 extra in your pocket each month.

Which option would you choose?

Further reading:

Case Study #3 — A Role Model for Financial Awareness

Vinaya HS — Wed, 17 Jun 2009 09:56:33 +0000

A friend and I were discussing about the New Pension Scheme when my friend commented,

It’s too nascent. The risk is very high. They don’t even mention the interest upfront. Based on your selection and market trends, the sum accumulates. Then there is a commission involved. I wonder what’s the idea behind charging a commission. It’s sad. It’s like gifting someone expensive wine with the price tag on and then asking for a sip back. Not even asking. It’s grabbing.

If you can analyze a financial product this much, you really are well set for a financially healthy life. Because, you know what to avoid.

Further reading:

Tip Tuesdays: Why You Should File Your Income Tax Returns Every Year?

Vinaya HS — Tue, 16 Jun 2009 11:35:11 +0000

A colleague recently asked,

I understand why we should pay income tax. But what is the need for filing income tax returns every year?

Short answer: You’re building a history about yourself — that you exist and earn.

This piece of history proves useful in a variety of situations — when you’re applying for a loan with a financial institution, when you’re applying for a visa for traveling to a different country, and such. The earlier you start building this history the better. You should continue to file your income tax returns irrespective of whether you pay income tax or not (say when you take a break for higher education and therefore aren’t earning).

What do you think?

Further reading: