Traveller cheques are now outdated ...............NEW CONCEPT.......... PRE-PAID CARDS...........Vs CREDIT/DEBIT CARDS

I approached my bank for traveller’s cheques (TCs) as I am going abroad on a holiday. Instead, it advised that I should carry a prepaid card. Why is it not advisable to carry TCs or credit and debit cards? How do prepaid cards work, and are these beneficial? Are these also available for domestic travel?

Travel cards are foreign currency prepaid cards that are accepted at more than 9,00,000 VISA/MasterCard-enabled ATMs and over 20 million point-of-sale (POS) terminals worldwide. They can be used to settle hotel bills, pay for airline tickets, shop, etc.

Travel cards are a much superior alternative to TCs, as the latter are available in fixed denominations and can be encashed only with money-changers.

Travel cards are a better alternative to foreign currency cash, as these ensure a high level of convenience and security. Also, there is no way of salvaging cash, if lost/stolen. The card, if lost, can be blocked, and the amount can be protected and a replacement card taken.

In debit and credit cards, the customer is exposed to the exchange risk every time he/she uses the card. In travel cards, the rate gets locked at the time of purchase of the card (in India). Also, if a debit or credit card is compromised, the full account/limit is at risk. In travel cards, the risk is limited to the amount loaded. Debit and credit cards usually have very low daily transaction limits for ATM (cash withdrawal) or POS, which are often not sufficient internationally. Travel cards are normally not available for domestic travel.

Recently, I redeemed my mutual fund investments and received Rs 8 lakh. Prior to this, I had applied for a personal loan of Rs 6 lakh, which got approved a week back. Since I have enough cash in hand after redeeming the mutual fund units, can I cancel my loan or lower the quantum of the loan? What is the process?

If the loan requested has been approved by the bank and not availed of, the customer has the option of either cancelling the request or seeking a reduced amount. Accordingly, the loan will either be cancelled or a revised loan amount approved.

My son is pursuing his higher education in the US. He took an education loan for which I am the guarantor. His university grants scholarships to students, based on their first semester performance. He has been chosen for it. With the scholarship, his loan requirement has reduced substantially. Can we request the bank to reduce the loan? If yes, will we be penalised?

In education loans, the interest is charged only on the outstanding amount (amount availed). In case the loan is not fully availed, the remaining loan amount will only be disbursed when you request the bank (according to your new requirement). Thus, there is no need to modify the sanctioned limit and reduce the loan amount.

However, when your son finishes his education and decides to repay the loan in equated monthly instalments (EMIs), he/you will have to approach the bank with a written request to schedule the EMIs according to the reduced loan and not on the basis of the sanctioned amount. There will be no penalty.