BackNovel, but how useful?
Novel, but how useful?
PremiumPhotograph: Ramesh Pathania / Mint
Marketers dream of launching a product that everyone thinks is exactly what they wanted all along. Let’s check out a few banking products which were launched recently to see whether they make the cut.
Virtual credit card
How does it work? Virtual cards require one-time registration with your bank. You will have to add your personal and credit/debit card details to get your unique login and password. Specify the amount you want to spend with your virtual card on shopping. The card generated will have a new 16-digit number, CVV2 number and expiry date. The virtual card number can be used as a credit/debit card number to shop online at any merchant website which accepts the service provider (VISA or Mastercard) concerned.
Features: The virtual card is valid for 24-48 hours. Once it expires, the unused amount is automatically credited back to the account from which it was created. If you do not use the card, you can cancel it to get the funds credited back to your account within 24 working hours.
There is no limit to the number of cards one may generate in a day, but banks usually allow expenditure of Rs100-50,000 per customer per day. The card cannot be used again after a successful online transaction.
Cost: Many banks offer the virtual card free. However, you need to be a registered Net banking customer of the bank.
Risk: K.V.S. Manian, group head (retail liabilities and branch banking), Kotak Mahindra Bank, says: “This product is relatively low-risk. But you should maintain the vigil that is needed during online transactions." Use of the card should not be delayed once it has been generated.
Among the banks that offer virtual cards are Axis Bank (eShop card), HDFC Bank (NetSafe card) and Kotak Bank (Netcard).
Debit-cum-credit card
If you choose credit card as the default option in Standard Chartered Bank’s “1 Money" debit-cum-credit card, you will be able to make it a debit card post-purchase, and vice versa.
Also See Banking Products (PDF)
How does it work? If credit card is the default option, a debit card transaction can be made using 1 Money by specifying so in the reply to the SMS that the bank will send when the purchase is made. The reverse is possible, again through an SMS reply—if debit card is the default option, a version which will work at ATMs. The SMS replies should be sent within 24 hours of the transaction. This facility is currently available only for Platinum credit card customers of the bank.
Cost: The card is expensive, at Rs6,000 per annum. Like other credit cards, it gives reward points for purchases made.
Risk: Subrat Pani, head (cards), Kotak Mahindra Bank, says: “Cards like these may be popular in South-East Asia, but I personally think they are quite a hassle. The entire procedure of swiping and replying to an SMS makes it cumbersome."
Most financial planners recommend keeping debit and credit card transactions separate. Zankhana Shah, a certified financial planner and head of Moneycare Financial Planning, Mumbai, says: “It’s good to have separate debit and credit cards. A debit-cum-credit card will spoil financial habits. It will even mess up other transactions. Will an ECS (electronic clearing system) running for an SIP (systematic investment plan) also have a choice?"
Global debit/ATM card
If you have a global debit/ATM card, you can access your bank accounts in at least 30,000 ATMs (VISA/Mastercard, as per your service provider) in India and about a million ATMs abroad. You can also use it to shop in India as well as abroad. Many banks provide this card with built-in travel insurance benefits: zero liability for all charges after reporting loss of the card and cover for purchases made while travelling.
Kotak Mahindra Bank, HDFC Bank, IDBI Bank, Syndicate Bank and Vijaya Bank are some of the banks that provide global debit/ATM cards.
Says Manian, “Kotak’s Global ATM card gives free access to all global VISA ATMs to preferred customers and to all VISA ATMs in India to standard customers."
The Reserve Bank of India has asked banks to provide free inter-bank ATM access in India from April.
Risk: Low, as the card usually comes with insurance.
Account aggregation service
Keeping track of finances can involve hopping from one website to another and remembering multiple login IDs, passwords and PIN numbers. Money Monitor, an account aggregation service launched by Yes Bank, claims to bring some method to this madness by monitoring all your accounts in one place across banks and products. The service is powered by Yodlee, a US-based online service provider. Money Monitor’s single-user interface supports at least 9,000 accounts across at least 15 product categories.
What do you get?
• Holistic financial picture with all balances and transactions gathered from financial, bill and reward accounts.
• Personal data reports, such as a net worth statement, cash flow report and historical account balances.
• Expense categorization for all credit card and bank account transactions so that you can know, in an instant, exactly where you are spending your money.
• Budgeting, including simple tools for setting goals and monitoring progress.
• Alerts via email or SMS to avoid fraud, late fees and overdraft charges.
• Lifetime digital storage of all financial transaction history.
• Universal portfolio tracker with quotes, company profiles, historical performance and asset allocation charts.
Cost: All Yes Bank customers can use this service for an annual fee of Rs149.
Suresh Sheti, president (transaction banking), Yes Bank, says: “Customer security is one of the topmost priorities for us. Money Monitor provides the convenience of remembering only a single Internet banking password to access and manage multiple accounts online with built-in security to protect consumers and their data."
Deven Shah, business head, Money Mentor, a company that creates information and software tools for financial companies, says: “The banks can misuse your data by cross-selling it. It all boils down to trust."
Microsoft Money and Egg Money Manager offer similar services in the international market. Microsoft Money was initially available as a product, but is only downloadable now.
Risk: This service is hassle-free, saves time and costs peanuts. But it has a problem: It stores your password and information about all your accounts in one central location. So, in a scenario where many people flinch while giving the details of a credit card online (which has brought products such as virtual cards into existence), this product seeks to put the entire financial life of its customers online. If the security system fails, your entire financial portfolio could be wiped out.
Shoba John, programme director, Health Bridge, says, “Keeping track of one’s money and expenses will be easier with this product. My only concern is security, as all my details will be available at one place. The risk is way too high. I would prefer keeping my accounts separate. I am not impressed."
CONNECT
Change
Stuck with a health insurer whose services are not up to the mark? Soon you will have the option of changing insurers at the time of renewing your policy. However, you will be able to do so only for a policy that would be common to all insurers in terms of features; the premiums and services would depend on the insurer. The General Insurance Council (GIC), a statutory body representing all general insurance companies, has drafted a common health insurance policy which all insurers would have to offer, apart from the policies they offer on their own. This common policy would be completely portable across all insurers.
Invest
The National Housing Bank has launched three fixed deposits: Sunidhi Term Deposit Scheme, Suvridhi Term Deposit Scheme and zero-coupon bonds. In the first, investors will get 9.25% interest for one year and 9% for up to five years. The minimum deposit amount is Rs50,000. The Suvridhi scheme, which will also help save tax under section 80C of the I-T Act, will pay an interest of 8.75% and has a lock-in period of five years. The minimum deposit is Rs10,000 and the maximum, Rs1 lakh in a financial year. The zero coupon bonds will be sold at a discount of Rs4,360 with a face value of Rs10,000 that the holder will get after a maturity period of 10 years.
Buy
If you need money urgently, you can borrow against gold to keep interest rates reasonable. But keep the following in mind:
Eligibility: Anyone between 18 and 75 years is eligible, but must be from a bank branch’s area. You should have been staying at the current residence for at least six months.
Interest: 9.5-13.75%. It could be fixed or floating.
Collateral: Jewellery, bars, gold exchange traded funds.
Amount: Rs5,000-15 lakh.
Tenure: Options vary from bank to bank.
Availability: Easier than personal loans.
Disbursement: As fast as within 30 minutes. ID, address proof and three passport-size photographs will be needed.
Penalty: Collateral is usually seized after 90 days grace period if the loan is not repaid.
Insure
You should not bank on just a group health policy. Shift to an individual health cover if you don’t already have one. Keep the following points in mind:
• Group health insurance is more comprehensive than individual insurance.
• In the name of portability, the company may just waive the initial waiting period and also the waiting period for certain pre-
existing diseases.
• The chances of getting a cover narrow as you age.
• If you buy a policy late in life, the ailments you may be suffering from may not be covered.
The views expressed on this page are not the newspaper’s opinion and are provided for information purposes only by Outlook Money. Readers are requested to do their own research. Neither Mint nor Outlook Money will be responsible for any actions and outcomes based on information provided here.
Write to us at outlookmoney@livemint.com
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