WHAT IS EATING INTO YOUR WALLET
They
are small, pesky and crop up everywhere. Though some of them may be hidden, the
bulk of arbitrary fees and charges are right under your nose. Find out how they
are devouring your hard-earned wealth.
You’re a
hard worker and, more importantly, a diligent saver. You’re a savvy planner and
a conscientious investor. Yet, your monthly budget seems to be strained. The
problem is the holes in your wallet, from tiny invisible ones to humongous
ones, that have been created by pesky fees and charges. Whether they’ve sneaked
up on you or have been stated upfront in bold letters, these seem to be
cropping up everywhere.
Buy a car, pay exorbitant handling charges; dine at a restaurant, shell out a sizeable service charge; take a road trip, pay a toll tax after every 100-250 km. Every sphere of your life seems to have been overrun by some or the other capricious charge.
Every company, seller or dealer has come up with an innovative name for a novel fee, but a fee or charge by any other name is going to leave you poorer than you had accounted for. Nowhere is this more apparent than in school fees. As every parent will bemoan, a child’s education will cost you at least 50% more than the advertised tuition fee. There is a sports facility fee, annual day fee, heritage festival fee, library charge, building development fee, laboratory fee…the list keeps getting longer each year. Most people have become resigned to it, if not entirely inured.
However, it’s the prevalence of such arbitrary fees in other areas that has begun to pinch people. We’ve complained about it and a heated discussion and debate ensues every time someone comes up with a new charge, but, unfortunately, on the ground, there’s no concrete action. Even before the dust has had time to settle, there’s a new charge that has been tacked on to yet another service.
“The onus is on the consumers. You need to read the fine print carefully before you avail of a service. However, if you find that you’ve been charged for something that hadn’t been disclosed to you beforehand, you have the right to question it,” says consumer activist Jehnagir Gai.
For most customers it’s a grin-andpay situation, since few have the time or the patience to follow up, especially if they are dealing with a small amount. But, remember, even minor charges can add up to big costs. So, scrutinise all your bills and statements to know which holes you need to, and can, plug.
Buy a car, pay exorbitant handling charges; dine at a restaurant, shell out a sizeable service charge; take a road trip, pay a toll tax after every 100-250 km. Every sphere of your life seems to have been overrun by some or the other capricious charge.
Every company, seller or dealer has come up with an innovative name for a novel fee, but a fee or charge by any other name is going to leave you poorer than you had accounted for. Nowhere is this more apparent than in school fees. As every parent will bemoan, a child’s education will cost you at least 50% more than the advertised tuition fee. There is a sports facility fee, annual day fee, heritage festival fee, library charge, building development fee, laboratory fee…the list keeps getting longer each year. Most people have become resigned to it, if not entirely inured.
However, it’s the prevalence of such arbitrary fees in other areas that has begun to pinch people. We’ve complained about it and a heated discussion and debate ensues every time someone comes up with a new charge, but, unfortunately, on the ground, there’s no concrete action. Even before the dust has had time to settle, there’s a new charge that has been tacked on to yet another service.
“The onus is on the consumers. You need to read the fine print carefully before you avail of a service. However, if you find that you’ve been charged for something that hadn’t been disclosed to you beforehand, you have the right to question it,” says consumer activist Jehnagir Gai.
For most customers it’s a grin-andpay situation, since few have the time or the patience to follow up, especially if they are dealing with a small amount. But, remember, even minor charges can add up to big costs. So, scrutinise all your bills and statements to know which holes you need to, and can, plug.
Banking
While customers may be wary of most services, they tend to trust banks implicitly and rarely bother to check the fees and charges. Ignorance isn’t quite bliss here.
Pay for everything extra
Banks are pushing you to move to the virtual world since every service in the physical realm seems to come at a cost. For instance, only one chequebook is free per quarter or six months, depending on your bank. For each extra chequebook you want, you will have to pay 50. Duplicate documents or old records also come at a price (see table). So it makes sense to save online bills or account statements.
Check your bank’s website carefully before you avail of a service to avoid any shocks. For instance, cancelling a cheque or draft will cost you 40-100, while allowing operations through a power of attorney will cost about 500.
From quarterly to monthly
You’ll need to keep a close eye on your average balance since banks have moved from a quarterly basis to a monthly one. They have hiked the penalty too. From 500-750 per quarter, the fine for not maintaining the average balance has been raised to 350-500 per month. Your free cash transactions will also depend on this. From 3-5 such transactions in a month, you are limited to only two if your average balance is low. Beyond this, every transaction will cost you 60-90.
Of course, if you have insufficient funds in your account and your cheque or ECS payment is rejected, you will have to pay 100-250.
Prepayment fee and conversion charge
Though prepayment fee has been abolished for home loans, it still exists for car loans. “There’s no reason why it should be levied on car loans. Most customers get confused about the calculation of the prepayment fee since it can be as high as 10% if you prepay a loan within six months, and 5% if you do so within a year,” says Adhil Shetty, CEO of BankBazaar.com.
Another common gripe is that new customers are offered loans at lower interest rates, whereas the older borrowers are charged a sizeable conversion charge as well as processing fee to allow them to take advantage of the lower rate.
While customers may be wary of most services, they tend to trust banks implicitly and rarely bother to check the fees and charges. Ignorance isn’t quite bliss here.
Pay for everything extra
Banks are pushing you to move to the virtual world since every service in the physical realm seems to come at a cost. For instance, only one chequebook is free per quarter or six months, depending on your bank. For each extra chequebook you want, you will have to pay 50. Duplicate documents or old records also come at a price (see table). So it makes sense to save online bills or account statements.
Check your bank’s website carefully before you avail of a service to avoid any shocks. For instance, cancelling a cheque or draft will cost you 40-100, while allowing operations through a power of attorney will cost about 500.
From quarterly to monthly
You’ll need to keep a close eye on your average balance since banks have moved from a quarterly basis to a monthly one. They have hiked the penalty too. From 500-750 per quarter, the fine for not maintaining the average balance has been raised to 350-500 per month. Your free cash transactions will also depend on this. From 3-5 such transactions in a month, you are limited to only two if your average balance is low. Beyond this, every transaction will cost you 60-90.
Of course, if you have insufficient funds in your account and your cheque or ECS payment is rejected, you will have to pay 100-250.
Prepayment fee and conversion charge
Though prepayment fee has been abolished for home loans, it still exists for car loans. “There’s no reason why it should be levied on car loans. Most customers get confused about the calculation of the prepayment fee since it can be as high as 10% if you prepay a loan within six months, and 5% if you do so within a year,” says Adhil Shetty, CEO of BankBazaar.com.
Another common gripe is that new customers are offered loans at lower interest rates, whereas the older borrowers are charged a sizeable conversion charge as well as processing fee to allow them to take advantage of the lower rate.
Credit cards
Nowhere are complaints more rampant than in credit cards. Don’t accept blindly any fee or surcharge that appears on your card bill.
Annual fee or dormant card charge
Most banks offer you a free credit card, but you need to check two things now. What will be the fee from next year? And is there a dormancy fee? Often, a credit card is free only for the first year and you will have to pay an annual fee of 100-1,000 from next year onwards. In the case of some premium cards, it may be free only if you spend a minimum amount within a specified time period. You can’t hoard your plastic anymore. Some banks like the Standard Chartered Bank levy a non-usage fee of 250 if you don’t swipe a card within a year.
Banks have also done away with the free ATM withdrawal cards and allot only debit cards now. Customers don’t have a choice but to pay the annual debit card maintenance fee, which ranges from 100-350.
Of course, there’s also the late payment fee for credit cards that you have to deal with. Some banks have upped it from 200-500 that was charged earlier to 350-600. If you believe that you’ve been defrauded and want to check who has signed the charge slip, you’ll have to pay the bank 50-200 to get hold of the slip.
Free deals on cards
When you sign up for a premium plastic, you may be offered a plethora of deals, from free flights to dining discounts. Most of these will come with conditions, usually a minimum amount that you will have to spend. In case of free flight tickets, only the base fare will be waived. You will have to shell out the taxes and surcharges from your pocket, which can be almost double the base fare. So, before you’re lured into signing up for free goodies, find out whether the upfront cost of the premium card will actually help you save money on advertised deals.
Reward point redemption
Yes, banks have now started charging you for redeeming your hard-earned reward points too. You can’t keep hoarding them endlessly since most points are valid for 1-3 years. Converting these into gifts or vouchers now comes with an added price of 30-99.
EMI transactions
Whenever you buy an expensive product, you’ll probably get a call from the bank wanting to know if you’d like to convert the purchase into EMIs. Usually broadcast as a ‘0% finance’ scheme, since there is no interest rate, it seems a tempting option. Except that there’s usually a high processing fee. For instance, to convert a purchase of 20,000 into six months’ EMI, you will have to pay about 8,000 upfront and the processing fee will be 650-900. “It’s like paying a proxy fee, which can actually turn out to be a hefty interest,” says Shetty.
Nowhere are complaints more rampant than in credit cards. Don’t accept blindly any fee or surcharge that appears on your card bill.
Annual fee or dormant card charge
Most banks offer you a free credit card, but you need to check two things now. What will be the fee from next year? And is there a dormancy fee? Often, a credit card is free only for the first year and you will have to pay an annual fee of 100-1,000 from next year onwards. In the case of some premium cards, it may be free only if you spend a minimum amount within a specified time period. You can’t hoard your plastic anymore. Some banks like the Standard Chartered Bank levy a non-usage fee of 250 if you don’t swipe a card within a year.
Banks have also done away with the free ATM withdrawal cards and allot only debit cards now. Customers don’t have a choice but to pay the annual debit card maintenance fee, which ranges from 100-350.
Of course, there’s also the late payment fee for credit cards that you have to deal with. Some banks have upped it from 200-500 that was charged earlier to 350-600. If you believe that you’ve been defrauded and want to check who has signed the charge slip, you’ll have to pay the bank 50-200 to get hold of the slip.
Free deals on cards
When you sign up for a premium plastic, you may be offered a plethora of deals, from free flights to dining discounts. Most of these will come with conditions, usually a minimum amount that you will have to spend. In case of free flight tickets, only the base fare will be waived. You will have to shell out the taxes and surcharges from your pocket, which can be almost double the base fare. So, before you’re lured into signing up for free goodies, find out whether the upfront cost of the premium card will actually help you save money on advertised deals.
Reward point redemption
Yes, banks have now started charging you for redeeming your hard-earned reward points too. You can’t keep hoarding them endlessly since most points are valid for 1-3 years. Converting these into gifts or vouchers now comes with an added price of 30-99.
EMI transactions
Whenever you buy an expensive product, you’ll probably get a call from the bank wanting to know if you’d like to convert the purchase into EMIs. Usually broadcast as a ‘0% finance’ scheme, since there is no interest rate, it seems a tempting option. Except that there’s usually a high processing fee. For instance, to convert a purchase of 20,000 into six months’ EMI, you will have to pay about 8,000 upfront and the processing fee will be 650-900. “It’s like paying a proxy fee, which can actually turn out to be a hefty interest,” says Shetty.
Surcharge subterfuge
Two recent consumer cases highlight how even upfront charges can be misinterpreted and misused by service providers.
Bank cannot levy surcharge for all transactions at a petrol pump
Naina Booch purchased spare parts for her car from a petrol pump at Dadar, Mumbai, in February 2009. She used her HSBC credit card to pay a bill of 30,559. However, she was astonished to see an additional amount of 859 in her card statement. Booch, an advocate, lodged a complaint in a consumer forum, stating that the 2.5% surcharge was not applicable since she had not bought fuel. The bank argued that as the transaction had taken place at a petrol pump, it attracted surcharge. In June this year, a city consumer forum ruled that the complainant had not been informed that every transaction at a petrol pump would attract surcharge, or she would have purchased the spare parts from elsewhere. The forum directed the bank to pay Booch 25,000 and refund the surcharge with an interest of 12% a year from 2009.
Banks and oil companies cannot form a monopoly and force customers to pay a surcharge
In July this year, the Competition Appellate Tribunal quashed an agreement between Hindustan Petroleum and ICICI Bank, whichwas being used to force all HP dealers to install only ICICI Bank’s credit card swipe machines at their petrol pumps. If a customer used any other credit card to buy fuel, he would have had to pay a 2.5% surcharge. The tribunal bench stated that this ‘unfair’ agreement was unjustified and a restrictive trade practice prejudicial to the public interest. It asked the oil PSU and the private bank to pay 2 lakh.
Real estate
Savvy home buyers have cottoned on to most developers’ tricks of adding sundry charges. So, builders have come up with a couple of new ones.
‘Legal fees’ on property
registration
You have bought a new house and have paid the entire cost to the builder. All that’s left is the
registration of the property, which is an arrangement between you and the government. You can hire a lawyer to register the property and pay the stamp duty, for which he will charge 2,000-5,000. However, many builders are now using this as an opportunity to make extra money. They force buyers to use them as intermediaries for registering the property and levy exorbitant charges ranging between 15,000 and 30,000 in the name of ‘legal fees’. If you ask the builder for a receipt, he may refuse to carry out the registration.
Individual water and electricity connections
The builder is supposed to get approvals from local authorities for the water and power connections after paying the relevant fees, and these charges are included in the cost of the property. However, many builders levy water and power connection charges on individual buyers when they give possession of the property. The charge varies from 5,000-10,000 based on the city. This is like asking buyers to pay for the same facility twice—one as part of the property’s cost, and again as a separate provision.
You have bought a new house and have paid the entire cost to the builder. All that’s left is the
registration of the property, which is an arrangement between you and the government. You can hire a lawyer to register the property and pay the stamp duty, for which he will charge 2,000-5,000. However, many builders are now using this as an opportunity to make extra money. They force buyers to use them as intermediaries for registering the property and levy exorbitant charges ranging between 15,000 and 30,000 in the name of ‘legal fees’. If you ask the builder for a receipt, he may refuse to carry out the registration.
Individual water and electricity connections
The builder is supposed to get approvals from local authorities for the water and power connections after paying the relevant fees, and these charges are included in the cost of the property. However, many builders levy water and power connection charges on individual buyers when they give possession of the property. The charge varies from 5,000-10,000 based on the city. This is like asking buyers to pay for the same facility twice—one as part of the property’s cost, and again as a separate provision.
Telecom
This may not be a completely transparent sector, but neither is it opaque. You do, after all, have an inkling of some of the tariffs. Yet, there are charges that surreptitiously added.
PC Secure
If you’ve got a broadband connection, your bill may have an additional charge of 75-100 for a PC Secure service, which is supposed to protect your computer from virus and malicious software. This may also be covertly called DSL usage charge and will be in addition to your broadband plan. However, people usually install better antivirus software in their computers, so paying for this service hardly makes sense.
Auto-subscription for VAS
The most common complaint, especially in case of prepaid connections, is the automatic subscription of a value-added service. From Hello Tunes and cricket updates to astrology and travel tips, you suddenly find your inbox being inundated with irrelevant SMSes, and worse, paying for them. While most of the VASes are charged on a monthly basis, some are payable daily. “About 90% of the mobile phone customers have prepaid connections. Since they do not receive any bills, they aren’t even aware of what they have subscribed to,” says Mahesh Uppal, a telecom consultant and director at First Com (India).
This may not be a completely transparent sector, but neither is it opaque. You do, after all, have an inkling of some of the tariffs. Yet, there are charges that surreptitiously added.
PC Secure
If you’ve got a broadband connection, your bill may have an additional charge of 75-100 for a PC Secure service, which is supposed to protect your computer from virus and malicious software. This may also be covertly called DSL usage charge and will be in addition to your broadband plan. However, people usually install better antivirus software in their computers, so paying for this service hardly makes sense.
Auto-subscription for VAS
The most common complaint, especially in case of prepaid connections, is the automatic subscription of a value-added service. From Hello Tunes and cricket updates to astrology and travel tips, you suddenly find your inbox being inundated with irrelevant SMSes, and worse, paying for them. While most of the VASes are charged on a monthly basis, some are payable daily. “About 90% of the mobile phone customers have prepaid connections. Since they do not receive any bills, they aren’t even aware of what they have subscribed to,” says Mahesh Uppal, a telecom consultant and director at First Com (India).
Cars
Whether you’re buying a new car or getting your old one serviced, be prepared to pay more than you had intended to.
Logistics and handling charge
One of the biggest grey areas, the dealer can include anything under this heading. It could be warehouse charges, the fuel that has been put in the car, the cost of the number plate, the pollution control check and the insurance cost while the vehicle was in transit. Logistics fee is 2-5% of a car’s value, and, unfortunately, all dealers now levy this charge, though you could try to bargain for it to be lowered. “The ex-showroom price is the cost of the car at the dealer’s, so why should you have to pay for a transit fee or warehouse charge? If you consider that a dealer is levying 3,000-5,000 as handling fee on a car worth 4 lakh, then dealers are minting thousands of crores every year. Where is this money going?” asks Adil Jal Darukhanawala, editor-in-chief of Zigwheels. tomers, but at other, it’s the telecom company that decides what’s best for you. It takes numerous calls to the customer care centre to get rid of a service. This is another additional expense since such calls are no longer free. “I once subscribed to a monthly pack of additional SMSes for 19. The next month, the company automatically deducted this amount. It took me days to get the subscription cancelled and the money refunded,” says Gai.
Uppal offers two tips: “It’s difficult for an individual to handle a problem, but people can form a group and take their grievance to the Telecom and Regulatory Authority of India. The regulator should follow the same rules for mobile phones as it does for STD and ISD connections. These services are closed unless the customer has given an explicit consent for them.”
Free servicing is not really free
If you’re a new car owner, be prepared that your free servicing will come for a price. You may find that you’re paying for tyre rotation or body polishing, even if you hadn’t asked for it. However, the major moneyspinner is the overhauling that needs to be done at 40,000 km. The service centre will begin pestering you when your odometer starts inching upwards of 37,000 km. As a conscientious owner, you’ll agree to it. However, the service centre will insist on the same overhauling after you cross the 40,000 mark. So, you may end up paying twice for the same thing.
Travel
Given the skyrocketing fares and arbitrary ancillary fees, the travel sector is rife with charges that can double your travel budget.
Split pricing
Most experienced travellers already know that airlines advertise a low base fare and that the additional taxes and surcharges add up to a sizeable amount. This pricing strategy now seems to have seeped into hotels too. Most hotels lure customers with a low room rate, but tack on various charges to the final bill that is presented to the traveller when he’s vacating the hotel. The bill may include anything from Internet access charge and pool usage fee to a ‘resort’ fee. “If the charges had not been disclosed to you while booking the hotel, you can refuse to pay them,” advises Nikhil Ganju, country head, TripAdvisor India. However, he agrees that it can lead to a sticky situation. In fact, impatient not to miss their flights or trains, travellers grudgingly pay up. This is why before you book a hotel, make sure that you ask all questions regarding costs, so that your holiday doesn’t end on a sour note.
Arbitrary airline charges
Domestic airlines often come under the scanner of the regulator if their fares skyrocket, which is why they keep a tight rein over their prices. However, they have carte blanche when it comes to fixing ancillary fees, so they keep hiking them arbitrarily (see Travel fee traps). Two of the latest are the seat preference charge, which ranges from 50-750, as well as the fee that you pay when you redeem frequent flyer miles, especially if you choose to do so for a last-minute booking.
“The airlines don’t hide their fees. They just inform you about them at the last minute, when you don’t want to go through the entire ticket booking process again. I had to recently pay a Web convenience fee of 200 while booking a GoAir ticket on their website. The fee was tacked on just before I had to make the credit card payment,” says Gai.
Adds Ganju: “I was booking a flight from Singapore to Bali and opted for Air Asia since the fare was Singapore $300 rather than S$600 that Singapore Airlines was charging. However, the final fare for Air Asia was S$450, which included a checked-in baggage fee and an airport check-in fee. The worst part was that for an overweight baggage of 10 kg, I had to pay S$180 extra, a fee that wasn’t mentioned anywhere in the six-page ticket.”
Cancellation or rescheduling charge
Most travel portals, hotels and airlines will clearly state their cancellation policy and charges. This is another charge that has been recently hiked by 750-950 by airlines. If you’ve booked your flight or hotel through an online travel agent, you may have to pay the cancellation fee twice—to the hotel/airline and a service charge to the OTA.
Where this pinches most is if you need to reschedule your reservation. A simple request for change of dates won’t do. You will be told that you need to cancel the original booking, and, of course, pay the hefty cancellation charge. Only then will you be allowed to make a fresh booking.
Given the skyrocketing fares and arbitrary ancillary fees, the travel sector is rife with charges that can double your travel budget.
Split pricing
Most experienced travellers already know that airlines advertise a low base fare and that the additional taxes and surcharges add up to a sizeable amount. This pricing strategy now seems to have seeped into hotels too. Most hotels lure customers with a low room rate, but tack on various charges to the final bill that is presented to the traveller when he’s vacating the hotel. The bill may include anything from Internet access charge and pool usage fee to a ‘resort’ fee. “If the charges had not been disclosed to you while booking the hotel, you can refuse to pay them,” advises Nikhil Ganju, country head, TripAdvisor India. However, he agrees that it can lead to a sticky situation. In fact, impatient not to miss their flights or trains, travellers grudgingly pay up. This is why before you book a hotel, make sure that you ask all questions regarding costs, so that your holiday doesn’t end on a sour note.
Arbitrary airline charges
Domestic airlines often come under the scanner of the regulator if their fares skyrocket, which is why they keep a tight rein over their prices. However, they have carte blanche when it comes to fixing ancillary fees, so they keep hiking them arbitrarily (see Travel fee traps). Two of the latest are the seat preference charge, which ranges from 50-750, as well as the fee that you pay when you redeem frequent flyer miles, especially if you choose to do so for a last-minute booking.
“The airlines don’t hide their fees. They just inform you about them at the last minute, when you don’t want to go through the entire ticket booking process again. I had to recently pay a Web convenience fee of 200 while booking a GoAir ticket on their website. The fee was tacked on just before I had to make the credit card payment,” says Gai.
Adds Ganju: “I was booking a flight from Singapore to Bali and opted for Air Asia since the fare was Singapore $300 rather than S$600 that Singapore Airlines was charging. However, the final fare for Air Asia was S$450, which included a checked-in baggage fee and an airport check-in fee. The worst part was that for an overweight baggage of 10 kg, I had to pay S$180 extra, a fee that wasn’t mentioned anywhere in the six-page ticket.”
Cancellation or rescheduling charge
Most travel portals, hotels and airlines will clearly state their cancellation policy and charges. This is another charge that has been recently hiked by 750-950 by airlines. If you’ve booked your flight or hotel through an online travel agent, you may have to pay the cancellation fee twice—to the hotel/airline and a service charge to the OTA.
Where this pinches most is if you need to reschedule your reservation. A simple request for change of dates won’t do. You will be told that you need to cancel the original booking, and, of course, pay the hefty cancellation charge. Only then will you be allowed to make a fresh booking.
Entertainment
It’s a free-for-all market when you shop or dine out, more for sellers than buyers. Every retailer seems to tack on any charge that he wants to.
Service charge
This charge imposed by a restaurant doubles as a variable pay, which is on-taxable, and is
given to staffers over and above their contracted salaries. But most restaurants pass on only about 50% of the service charge to the staff and the rest is kept by the establishment to compensate for crockery breakage and damage to property. Internationally, the grumble is that this is an excuse to pay lower salaries to the staff.
Online convenience charge
When you book a movie or show ticket online, you have to pay a convenience charge of 10-150, depending on the cost of the ticket. What’s convenient about wasting printer’s ink and still having to stand in a queue to get physical tickets at a counter? Worse, the charge is levied on each ticket, so even if it’s a onetime transaction, you end up paying a sizeable sum.
Parking at malls
While no shopper would mind paying a charge for parking at a mall, what is a fair amount to pay? Parking charges vary from 10-200 for an hour. Builders justify it as the cost of maintaining the parking space as well as paying the salary of the staff. Does the maintenance vary so much among malls, especially since in most cities the parking space is not part of the FSI and is not included while assessing the property tax? Some malls have tucked away the entry to the parking area in a small corner and insist on valet service, which obviously comes for a premium.
Charity charge
‘Would you like to donate for charity?’ It’s a question most shoppers have heard at the billing counter. You have probably been happily agreeing to the donation without bothering to find out about the charity your contribution will go to. Some retailers will ask for ‘charity’ in the name of rounding off the final bill, while some will do so without even taking your permission. While it is good to be generous, be wary of establishments that do not put the contribution on the bill. “There’s no accountability for this money. The merchant could be collecting 5 lakh a month from customers, but only giving 50,000 as charitable contribution,” says Gai.
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