According to news reports, the Reserve Bank of India (RBI) has given banks the freedom to fix service charges for their transactions. This has been done to promote cashless transactions in the country. Credit Card transactions have started going up. It is expected that cash transactions will become more expensive in the coming days.
It’s begun!
HDFC Bank, India’s second-largest lender among private banks, has already started hiking the fee for its cash transactions. This is applicable for all savings account holders.
According to reports from the Press Trust of India (PTI), HDFC Bank will be raising charges for certain transactions from 1st March, 2017. HDFC Bank has put a limit on third-party transactions and reduced the number of free cash transactions that customers can avail. Now, as an HDFC Bank customer, your third-party transactions will be capped at Rs. 25,000 per day. Also, you can make only four cash transactions free of charge. Earlier, this was five. Wait! There’s more. The cash transactions that you make after the free ones are done with, will now cost you 50% more. So, you need to shell out as much as Rs. 150 for non-free transactions.
HDFC Bank has also put a limit on the amount of free cash transactions that can be done at one’s home branch. Now, you can make cash transactions of only up to Rs. 2 lakhs per day if you want it to be free of charge. If you are planning to make transactions exceeding this amount, you will need to shell out Rs. 150 or Rs. 5 for every thousand, whichever is higher.
What about transactions that are made at non-home branches? Then, the limit will be Rs. 50,000 per day. If you exceed this amount, you will need to pay charges of Rs. 150 or Rs. 5 per thousand. You can expect other banks also to hike charges for cash transactions in the coming days.
As you might know, cash transactions at merchants that exceed Rs. 3 lakhs are banned now. You also need to pay a 100% penalty if you break this rule. Phew! Looks like it is best for everyone not to make many cash transactions.
Save by going cashless
Is there anything that you can do to save some money and still transact? Of course! If you are making small transactions, use the Unified Payment Interface (UPI) app. There will be no charges for transactions below Rs. 1,000. You can use the app to transfer money between banks. Also, for transactions over Rs. 1,000 the charges for using the UPI app will be the same as for National Electronic Funds Transfer (NEFT).
What about purchases that you make? You can save there, too. If you go cashless, that is. How? Why not use a Credit Card? There are several advantages to it.
Credit Card to the rescue
The Government has announced that there will be no service tax on Credit Card transactions of up to Rs. 2,000. So, go ahead and make all your small purchases using your Credit Card. Also, do you know the RBI has deregulated the interest rates that are applicable to Credit Card dues? Yes, that’s true! Banks can fix their own interest rates for dues on Credit Cards issued by them. That is the reason why the Annual Percentage Rate (APR) is not the same for all your cards. We are sure you didn’t know that one!
Now, what does this mean? This means that you have the freedom to choose Credit Cards that have a low APR, if you are someone who tends to have a huge outstanding balance on your Credit Card. Even otherwise, having a card with a low APR can help you pay lower interest in case you go for Cash on Card (which is very similar to a Personal Loan). Cash on card is given based on your Credit limit and is easy to get when compared to a Personal Loan. What’s more? You can even get a Cashback Credit Card to save more on those purchases. Note that as long as you pay your Credit Card balances in full, you can keep improving your Credit Score. So, if you use your Credit Card responsibly, you have a lot to gain.