Don’t delay Credit Card payment: 3-month RBI moratorium

If credit cardholder takes advantage of the moratorium, the credit score of the cardholder may not be impacted.

The RBI announced measures to improve the Indian economy in response to the pandemic of coronavirus.

The Reserve Bank of India said in a statement that all Indian financial institutions are permitted to allow three months moratorium on payments of installments of all credit cards and term loan dues arising between 1st March 2020 and 31st May 2020.

The RBI has clarified the same in this circular dated 27th March 2020.CRED recommends that you continue paying your total due amount (or as much as possible) within the due date to avoid interest charges @ 36 – 42% compounding annual interest rate, if you can.

Please note that the moratorium does not apply to interest charges. If you have Rs 1,00,000 due as on 3rd March 2020 and you take advantage of the moratorium till 31st May 2020, the dues payable on 3rd June 2020 could be as high as Rs 1,15,000 (Rs 1,00,000 (due amount) + Rs 15,000 (interest amount and other charges

CRED – Centre for Research on the Epidemiology of Disasters recommends that credit cardholder or borrower continue paying their total due amount within the due date to avoid interest charges @ 36 – 42% compounding annual interest rate.

1. Understand the 3-month moratorium period of RBI for Credit Card dues

As per the notification of Reserve Bank of India and subsequent clarifications dated 27th March 2020., The payment can only be “deferred” by 3 months, this is not an exemption from repaying the amount.

If credit cardholder takes advantage of the moratorium, the credit score of the cardholder may not be impacted.

Interest fees on credit cards will continue to be charged at as specified by credit card issuing bank.

For term loans, all EMIs will be shifted by 3 months i.e March 2020 EMIs will be due in June 2020 and May 2020 EMIs will be due in August 2020.

For credit card dues, billing will be restored on 31st May 2020. To avoid late fees and interest charges from 31st May 2020, you will have to pay your total due amount.

If you pay your minimum due, you will avoid late fees but will be levied interest charges on the outstanding amount.

2. Does this moratorium apply to all consumers including me?

The RBI has permitted banks to offer the moratorium at their discretion. Banks can define parameters of eligibility if any.

3 Will interest charges be levied if I take this option?

The notification of Reserve bank of India has clearly specified that interest on credit card or loan will continue to be charged on the outstanding amount during the 3-month deferment period.

4 What do I have to pay after 3 months RBI moratorium period?

Opting for 3 months ‘deferment’ option allows you to delay the payment of your credit card dues till 31st May 2020.

As per our understanding of the circular, you will be expected to pay your outstanding amounts and the interest charges on the due date after 31st May 2020 to avoid late fees and impact on credit score.

5. Will taking this option impact my credit score?

Exercising this option may not impact your credit score since the banks may not report it as a “default” to RBI recognized credit bureaus. More clarifications are expected from the RBI and banking institutions.

6. If I want to avail of this option, how can I do it?

Your credit card issuing bank will release guidelines around the RBI notification by next week.

It is advisable that the credit card holders or loan borrowers continue paying their total dues on the due dates to avoid any charges and fees.