Hyderabad: The Reserve Bank of India announced a three-month moratorium on term loans on Friday and later included the credit cards in another clarification saying credit card loans will also be covered.
Here is an explainer for you to understand how your credit card moratorium would work, as explained by Adhil Shetty, CEO of BankBazaar.com
The moratorium applies to three months period from March 1 to May 31. This is only deferment of payment of dues and not a waiver. So, the credit card issuing banks will charge interest on the outstanding balance.
How will moratorium be applied?
The banks issuing the cards need to finalise the details of their moratorium and communicate them to their customers. The RBI guidelines clearly say credit card dues, so it can be understood that the moratorium can be given on both the outstanding balance as well as card EMIs.
Suppose if I have Rs 50,000 outstanding and if I pay the bill by next bill cycle, there is no extra amount. Now if I opt for moratorium, will I have to pay interest for these three months?
Interest will accrue on the dues during the moratorium. Since the rate of interest will vary from one card issuer to another, the customers are advised to be in touch with their card provider for clarity. That said, if you don’t have financial difficulties during this period, you should continue to go ahead with the payments. This will help avoiding the additional interest.
Credit card debt is costlier compared to other loans. It will be better to pay the credit card bills as per schedule. Interest on unpaid dues can pile up quickly, become a burden, and also lower your credit score.
How do I inform to the card issuing bank that my income has been hit by Covid -19?
You may not have to. Wait for the bank to communicate the details of the moratorium to you and then act accordingly. If they ask for a proof, you can show the salary/income statement.
How about the credit card limit?
The terms and conditions applicable to your card limit are expected to remain the same. Your limit will be lower by the outstanding amount. After repayment, the limit will be replenished.
Impact On Credit Score
RBI Governor has mentioned there would be no impact on credit scores during the moratorium. However, it would be advisable to keep track of your credit score by checking it every month.
There were 20.1 crore credit cards as of January and the value of transactions was Rs 66,573 crore as of January. A month ago, there were 20.3 crore credit cards the value stood at Rs 65,736 crore as per RBI data.
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