If you are planning to have a vacation and would like to take your MAB savings with you, here are some tips to make the trip more memorable
The first step to be taken is knowing the terms and conditions of your credit card issuer. There is a common misconception that MAB cards are issued only by the bank. In fact, they are also available from many other financial institutions, and can be used by the traveler anywhere in the world.
MAB – (Sum of the individual EOD closing balance) / (number of days in a year) Assuming, a company asks for you to keep Rs.5,000 as minimum monthly balance in an account: on July 1, you deposit the full amount to the account. On July 12, you withdraw money equal to the sum of the deposits made during the year: you get this amount in the form of withdrawal charges. A small EOD balance remains in your account after you have taken a certain sum of money out of it. It is called the "EOD penalty". The penalty is determined by the bank, and it is different from the one you pay for overdraft fees.
The MAB penalty is the maximum amount you will have to pay for exceeding the credit limit for the month. It is payable at the time of withdrawal. If you want to pay off the balance, it may be possible that you pay off the penalties that have accumulated. However, if you want to keep the total amount of MAB penalties under control, there are some options available.
The bank may impose a maximum penalty which applies to the entire balance of the MAB. They may allow you to pay off the balance through credit card payment. Another option is that the bank will charge you interest on the total balance and then let you pay it off with the cash. This way, you will get rid of the excess penalties and not pay them to the bank.
However, this may not be possible if the bank allows you to pay the MAB through credit card payment. You can also approach the card issuer directly and find out if you are allowed to do so. The maximum MAB penalty you will pay will depend on the nature of the transaction. Some charges will be for any activity that you undertake on your card, while others may apply to any kind of over-limit.
If you have a lot of credit cards and want to avoid the MAB penalty charges, you can consider taking a low interest rate for the balance of your MAB account. Even a single card with a high limit will fetch you good rates of interest. However, if the MAB is in poor condition, you may find the interest rate lower than the market rate. This will give you a little bit of relief.
However, it is better to keep a balance of the minimum amount of your MAB account and a little money left as reserve. It is better to pay off the balance than to have to pay the MAB penalties. Withdrawal charges will be deducted from the remaining balance, so you will not have to pay a very high sum of money to the bank. If you can afford to do so, you can even choose to pay off the balance with the help of your credit card.
You may even choose to use your card with a low interest rate and keep a small amount in your MAB account. Pay it off every month and save some for making purchases. As you know, you need not pay the bank back unless the MAB has a large balance.