Snipping your card isn’t enough :: Business Line

Satish had applied for a credit card from ABC Bank about a year ago. Twelve months after getting the card, Satish realised that he did not receive much benefits and it was simply a headache. So he decided to cancel the card.

Satish first contacted the bank’s customer service by dialling the number given behind the card. He then found out the actual amount outstanding in the card, made an online payment and cleared all dues in the card account. Satish kept a record of his payment as proof.

On making a full payment of the outstanding balance, Satish contacted customer service again and placed a request for cancellation of the card. He made a note of the date and time of the call, as well as the name of the representative who took down the request. Satish also got a request confirmation number, as a reference for future correspondence.

Satish then wrote to the credit card company and sought verification that the account has been closed. He mentioned the details of his call with the customer service representative. He sent the letter through Registered Post, so that there is a legal record of the same.

After a few weeks, Satish received confirmation from the bank that the credit card has been cancelled and closed. He then proceeded to cut the credit card into small pieces across the magnetic strip.

Keep in mind

What Satish did was the correct step-by-step procedure in cancelling a credit card, which must be followed diligently. What are the points you need to note should you want to cancel your card?

The first and most important thing to remember is that the bank will not cancel your card unless you have paid all dues. This not only includes the expenses you incurred on your card, but also includes all interest, fees and charges on the card.

Sometimes, you may cancel your card after the billing date, and as a result, there may be a residue amount which is not reflected in your last statement. Other times, the amount outstanding may be quite large to pay it all at once. In such cases, if you make regular payments, either on a weekly or monthly basis, you will still accrue interest on the balance.

Many customers feel that some card charges are unfair and proceed to cancel the card without paying these. However, the bank will not cancel the card unless these dues are cleared. Further, you will have to continue paying interest and late payment charges on these dues until you settle everything. Simply cutting the card at your end and mailing it to the bank will not cancel the card. Insist on getting a written acknowledgement from the bank that the card has been cancelled.

Non-closure

If you do not follow the proper steps in closing the card, there may be a case when it may result in an outstanding balance on your card. For instance, if you do not get an acknowledgement from the bank, the bank may charge renewal fees which will show up as unpaid dues, even though you may have cut the card. This will get carried on month after month, attracting penalties. This will automatically reflect in your credit score, affecting your future loan prospects. So remember to actively follow up with the lender and get your credit card closed.

Does it affect your credit score?

By closing a credit card, you are reducing your overall credit limit. As a result, your credit utilization will go up on an overall basis and thus reduce your credit score.

Let’s say you have three cards with a total credit limit of Rs 1.5 lakh and you spend Rs 75,000 in a month. So your credit utilisation is 50 per cent. You close one of the cards which has a credit limit of Rs 50,000 as you are not using this card. In that case, your overall credit utilisation will be 75 per cent (75,000/100,000). This can suggest that you are credit hungry in nature.

Does this mean that you should not close unused cards? No. It is better to close unused cards to prevent misuse or fraud. However, if you wish to close more than one card, you should do so gradually and not all at once.

Further, the older the credit history, the better it is for your credit score. A long track record will help lenders judge your track record and hence determine future behaviour and default chances. Hence you must always look at keeping older credit cards alive, and close the newer ones if the need arises. If you already have a weak score, then work on improving your score first before proceeding to cancel the cards.

(The writer is CEO, BankBazaar.com)

Eye on India Facts are facts, but perception is reality :: Macquarie Research

Eye on India
Facts are facts, but perception is reality
Event
 Q1FY14 results beat estimates: 100+ stocks under our coverage reported
PAT 7% better than our expectation. Sales revenue was muted as expected
at 5% growth YoY, but operating margins surprised by 60bps. IT, Telecom
and Pharma were the key sectors to see earnings upgrades.
 Key changes to top 10 ideas: We replace Bharti with Idea, as Bharti’s large
USD debt is posing risks in the face of sharp currency depreciation while
Idea’s earnings have seen the highest % upgrades this earnings season. For
the list of other stocks with positive earnings revisions see Fig 17.
Impact
 Lowest quarterly revenue growth since Q1FY11 due to weak macro…:
The 5% revenue growth reflects the tough macro environment that companies
are operating in. Waning top-line growth is reflective of the sharp slowdown in
GDP growth to below 5% over the past couple of quarters.
 …but better than expected PAT growth: The 6% growth in PAT (ex-Oil
and gas) was 7% better than our estimates, driven by power, financials
and Tata Steel.
 PSU stocks were particularly weak: PSU stocks across financial and
energy sectors showed weak results. Excluding 6 PSU stocks in Sensex, net
profit growth was 9% yoy vs -2.7% yoy, led by a 120bps improvement in
operating margins.
 Operating margins have bottomed out…: EBITDA margins came in at
around 20.6%, which was up 20bps YoY but importantly higher than our
estimate by 60bps. This is likely as a result of moderating inflation trend and
stable oil prices during Q1FY14 that helped improve margins.
 …but may be at risk due to weakening currency: With INR touching all
time lows and crude prices inching up to US$110/bbl, the risk of input cost
pressures coming back has increased. Consensus is currently building in 11%
earnings growth for Nifty, driven by 5% revenue growth and 100bps
expansion in margins. While revenue assumptions are muted, margin
assumptions may be at risk given weak currency. However, as government
spending returns pre election, revenue growth has potential to surprise
upwards.
 Earnings revision ratio worsened; FY14 est downgraded further: The
ratio lost momentum in the last 3-4 months, as downgrades picked up with
falling demand. Earnings revisions are negative for most sectors barring IT,
Telecom and Media.
Outlook
 Market – what is left to say! It was mayhem that we saw, but the bright spot
was the bottoming out of the steel sector. Clearly domestic economy-related
sectors are coming under pressure and even the loved defensives are being
questioned. We would recommend following earnings upgrades as a prudent
stock selection criterion and be wary of stocks over owned by FIIs.

A closer look at market volatility :: Business Line

India Demographics – Playing The Enablers: Dolat Capital

The India story has taken quite a bit of whipping last quarter or
two, and a fair bit of that may be perceived to be self-inflicted and
rightly so. There are now doubts being expressed on the potential
of the demographic dividend playing out next decade, given the
structural challenges that the economy faces.
While the jury is still out on that, we believe that there are
opportunities that shall emerge next few years to play on some of
the themes that may be classified as ‘enablers’ to earn the so
called demographic dividend. We stress our intent – to look out
for sectors that will help India move towards realizing its
demographic dividend, not those that will benefit after the
dividend is realized.
We believe enablers for doing well in education shall be one of
the worthwhile segment to watch our for. We have also seen quite
a few of listed plays emerging over the last few years that offer
meaningful opportunities for making portfolio allocation. However,
given the high capex intensity, long gestation periods to generate
sustainable returns and disappointment with the listed players,
the investor interest has dwindled quite sharply. Yet given the
scalable, multi year growth opportunity, and higher priority on the
government social sector spending being a key driver, we expect
a few of these models to sucessfully play out in coming years.
Education and Training
India is one of the youngest population pools, with over 250 mn
students, nearly one fifth of its population. The size of India’s
student population in some of the segments is as large as over
ten million. However the challenge has been to improve the quality
and delivery of education services across the country, and the
concomitant resource pool.

HDFC Bank: Buy :: Business Line

BofA Merrill Lynch, Top Buys: Lupin, Idea, Hero Honda, TCS

Addressing 3 investor
questions post drop in markets
„3
rd Largest 1day market fall in 4 years: what now?
The market had its 3rd largest 1 day fall in 4 years falling 4% largely on fears that
India would impose capital controls on repatriation of money by FIIs. We think this
is unlikely since the policy makers realize the negative impact this would have on
flows into the country. So is this a buying opportunity? Tactically most of our
indicators show that it is better to wait for a further correction or some signs of
stability in the currency before buying India.
#1: Is India oversold? Not yet but approaching there
„ The market has fallen 4% on Friday. But a large part of it was reversal of the
gains of the previous few days. Overall, for the week the market fell only 1%.
„ Our analysis of past major falls indicates a mixed trend. Only in 54% of the
instances have markets given a positive return over next 1 month.
„ Based on our fund manager survey, sentiment on India is at a lower end of
last 12 month trend but not yet at extreme bearishness levels.
„ Technical indicators including RSI, 200 DMA are getting close to but are not
yet at over-sold levels.
#2: What will improve sentiment on India? The currency
„ The single biggest factor making investors nervous on India is the currency. A
stabilization of the currency would make us as well as investors more positive
on India. While the Govt has taken a series of steps to stabilize the currency,
it has not worked partly due to nervousness on the Fed tapering. Even after
the start of these measures, India is the 3rd worst performing currency
amongst EMs.
„ Based on past history, the markets give an average return of near 11% over
3 months once currency stabilizes. Given the negative sentiment in India
currently, we see a possibility of something similar this time too. An increase
in fx reserves by raising fx bonds accompanied by low trade deficit data could
help stabilize the currency over next few weeks.
#3: Do we continue to buy the high quality, outperformers?
„ While we are getting tempted to nibble at some of the under-performers in the
banking space, near term we continue to stick to stocks in the pharma, IT and
telecom space. Hero Honda is our non-consensus pick.
Top Buys: Lupin, Idea, Hero Honda, TCS

IRB Infrastructure Developers: Buy :: Business Line