Need urgent cash or want to make that impulsive purchase? Use your ‘debit’ card, the one linked to your mutual fund investments. Reliance Mutual Fund is offering investors an ‘Any Time Money Card’, that works like a debit card (allowing withdrawals at ATMs or point-of-sale transactions) and uses the schemes (debt and equity) one has invested in as the account.
Company officials note that liquid funds give better returns than other instruments like bank savings account. "However, customers tend to stick to their bank accounts as they are comparatively illiquid," points out one of them. "The new card is aimed at doing away with this limitation."
The move is interesting because it adds liquidity to mutual fund schemes, much like banking saving accounts. After the deregulation of the savings account interest rates, several banks are offering annual returns up to 6 per cent. Short-term FDs too are 3.75-7 per cent per year, depending on tenures. In comparison, ultra short-term and short-term debt funds are giving annual returns of almost 8.5 per cent as per Value Research, a mutual fund portal.
The Visa-enabled card, first introduced in 2006, was re-launched recently in association with HDFC Bank. The main changes include the concept of a primary scheme account and daily withdrawal limits. That is, investors must have either Reliance liquid fund — treasury plan or Reliance money manager fund -- in the portfolio to avail the card. The returns from these schemes are line with the category average. If both the schemes are a part of the portfolio, then the either one must be chosen as the primary scheme upfront. Else, the former will be picked by default.
Given the higher returns, financial planners advise individuals to park their short-term surpluses or any idle funds in debt funds. With Reliance MF's ATM card, investors can even access their funds instantaneously. However, many frown upon withdrawals from equity schemes, which are investments made with a long-term view. "Premature withdrawals," notes says Malhar Majumder, director, Gliese Consulting, "will derail your financial planning for long-term goals like retirement or children's education and marriage. The card is therefore a strict no-no for such withdrawals."
Using it: At the HDFC Bank ATMs, one can view details about the schemes, available balance and withdrawal limits. If you hold more than one scheme, you must choose the scheme and then withdraw funds from it. At non-HDFC Bank ATMs, you can withdraw funds only from your primary schemes. Also, at PoS terminals, only your primary scheme gets debited.
This is mainly for operational ease. But, it also makes HDFC Bank ATM withdrawals from other schemes akin to redemptions without paperwork.
Daily withdrawal limit: It would be the lower of 50 per cent of the scheme balance or Rs 50,000. For PoS transactions, the amount is capped at Rs 50 per cent of primary scheme balance or Rs 1 lakh, the lower of the two. For instance, say you hold two equity schemes with a balance of Rs 50,000 each and primary scheme account with Rs 1 lakh. Here, you can withdraw up to Rs 25,000 daily from each of the equity schemes and Rs 50,000 from the primary scheme.
Since mutual fund schemes are market-linked, the scheme balances and approved withdrawal limits will change on a daily basis. For calculating both, the scheme will consider the previous day's net asset value of the units held.
Exit loads are applicable for withdrawals within a year of investment in equity funds and the gold savings fund. Therefore, while the cash will be dispensed entirely. The remaining scheme balance will be adjusted after charging the requisite charges.
