The Reserve Bank of India (RBI) recently allowed banks to provide a three-month moratorium on fixed-term loan and credit card payments. The announcement was done in order to provide relief to borrowers affected by nationwide lockdown to contain the spread of coronavirus.

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But is it actually relief, especially for credit card users?

Let's understand in detail:

What is the 3-month moratorium for credit card users?

RBI has allowed banks to push the ‘Billed Credit Card dues’ falling

between March 1, 2020 to May 31, 2020. In simple words, this means that credit card payments can be deferred by 3 months. However, that comes with certain negative implications.

Also read: Banking body answers all the questions you may have on RBI's moratorium

Will the non-payment of bill the credit score?

No. If credit card users take advantage of the moratorium, the credit score may not be impacted. RBI said it will not be considered as 'default'.

Does this moratorium apply to all consumers?

The RBI has permitted banks to offer the moratorium at their

discretion. Banks can define parameters of eligibility, if any.

Bank-specific processes will be published next week on how

consumers can avail this option, according to CRED - a credit card based payment app.

Will interest rate be levied for the deferred period of payment?

Interest fees will continue to be charged at current rates or as specified by the credit card issuing bank, as per RBI.

How much interest will be charged?

Credit card companies charge a massive 36-42 percent interest per year. A skipped credit card bill means such interest will accrue, even if there is a moratorium.

Will there be any additional charge?

Credit card companies also typically charge steep penalties for late payments. While credit card companies are unlikely to charge a late payment fee, remember that credit card interest also gets charged at an additional 18 percent GST.

If that's the case, should one avail it?

The 3-month moratorium on credit card payments should be availed only by those who are facing a financial crunch due to the ongoing economic turmoil due to the lockdown, according to experts. Those who can pay the EMI should continue doing it.

"For credit card dues, billing will be restored on May 31. To avoid late fees and interest charges from May 31, customers will have to pay the total due amount. If they pay the minimum due, they can avoid late fees but will be levied interest charges on the outstanding amount," CRED said in a statement.

The interest will continue to accumulate even during the moratorium period of 3 months and create an additional burden on future installments, if not paid.

How to avail the moratorium?

Availing the moratorium is an option. Consumers will have to ask the bank to put a pause on bill payment during the moratorium period.

First Published:Mar 31, 2020 2:49 PM IST