1. Missing the insurance premium date
How you lose: Irrespective of the reason for missing the payment date for your insurance premium, you stand to lose a lot of money. Insurers usually give a 15-30 day grace period, but if you miss even this, your policy can lapse. Depending on the time lapsed, you have to pay the premium, along with the revival charges, to retain the policy after the grace period is over.
What’s your loss? The revival charge varies among different insurers. Typically, it is a flat fee of around Rs 500 or an interest on the outstanding premium, which is usually around 0.75% per month. The revival charges also depend on the type of policy.
2. Forgetting your credit card payment
How you lose: Among financial products, there’s nothing as easy to use and as complicated to understand as a credit card. If you miss a credit card payment, you stand to suffer losses in three ways. You will be slapped with a late payment fee; you will have to pay interest on the outstanding sum, and you will have to pay more for any purchases that you make in the next billing cycle.
What’s your loss? Usually, the late payment fee ranges between Rs 300 and Rs 700, depending on the payment due. The interest charged is 2-3% on the outstanding bill. You will have to pay an extra 2-3% for the purchases made in the next billing cycle. Your credit score will also suffer.
3. Ignorance about depositing advance tax
How you lose: Advance tax is required to be paid in three instalments. At least 30% of the tax by 15 September, 60% of the tax by 15 December, and the remaining by 15 March. If you fail to pay advance tax, you will have to pay interest on the defaulted amount.
What’s your loss? Penalty is 1% simple interest per month on the defaulted sum for three months. The penalty is the same (1%) if you missed the 15 December deadline. If you miss the final date of payment, you will have to pay 1% simple interest on the defaulted amount for every month until the tax is fully paid.
4. Delay in paying utility bills
How you lose: A family of four easily pays 6-8 utility bills a month, which includes mobile bills, electricity bills, Internet charges, among others. If you manage to miss these, you have to shell out the late payment fee. What’s your loss? Miss a couple of utility bill payments a month and you could be spending Rs 300-500 on late payment charges.
What’s your loss? Miss a couple of utility bill payments a month and you could be spending Rs 300-500 on late payment charges.
5. Forgetting the loan EMI payment
How you lose: This is again a double-edged sword. If you miss home or car loan instalment, not only are you slapped with a penalty, but your credit score also suffers.
What’s your loss? A late payment fee for a missed EMI on a personal loan with HDFC Bank is 24% per annum on the outstanding sum from the date of default. A late payment charge for a missed EMI on a home loan with ICICI Bank is in the range of Rs 500-5,000.
By Bindisha Sarang ET Wealth