RBI's Moratorium On Credit Card Dues: Should You Avail It?

To provide relief to individuals amid Covid 19 pandemic, RBI on a recent basis has allowed banks to offer 3 month moratorium on all fixed-term loans as well as credit card bills outstanding as on March 1, 2020.

So, here is a lowdown on all the aspects relating to moratorium allowed on credit card payments and whether or not credit card holders should avail it:

RBI's Moratorium On Credit Card Dues: Should You Avail It?

1. What does 3-month moratorium for credit card holders mean?

Similar to 3-month moratorium on term loans, credit card users have also got a relief in a way that their credit card payments falling due between March 1, 2020 and May 31, 2020 can be deferred by 3 months. RBI has thus pushed the 'Billed Credit Card dues' falling between March 1, 2020 to May 31, 2020. Remember it is not a waiver but a deferment that is on offer with a catch.

Also, if the user avails of such an advantage then his or her non-payment towards card dues for the above specified months shall not be deemed as 'default'.

2. Can all credit card users avail of this moratorium relief?

Banks based on their discretion would provide benefit under moratorium. They can also come up with eligibility criteria if any for availing the same. And as per a credit card based payment app, specific processes relating to the bank as to how customers can apply for the relief will be released over the next week.

3. Will interest be charged for the deferred payment period?

As per the central bank, interest rates will continue to be levied at existing rates or as defined by the credit card issuing bank. Generally, credit card companies charge a hefty 36-42% interest rate annually. So, even if there is a moratorium, this interest will still accrue.

4. Will there be additional charges?

Under the moratorium, there shall be no late payment charges which are typically charged by credit card companies. Nonetheless, it is to be remembered that on credit card interest an 18% GST charge applies.

5. Whether or not one avail of the moratorium relief for credit card dues?

The answer to this solely depends on your cash flow situation and if you can service the dues towards credit card payment you should definitely do so. Else, the interest will continue to pile up during the 3 months moratorium, creating burden on future payments.

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