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Explained: Why one shouldn't opt for moratorium on credit card payments

Explained: Why one shouldn't opt for moratorium on credit card payments

Explained: Why one shouldn't opt for moratorium on credit card payments
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By Anshul  May 22, 2020 7:02:08 PM IST (Published)

The Reserve Bank of India (RBI) has extended the EMI moratorium period by three months to August 31 from existing May 30.

The Reserve Bank of India (RBI) has extended the EMI moratorium period by three months to August 31. This extension also applies to credit card dues. In simple words, it means that credit card payments can be deferred by another three months.

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The extension of the moratorium will provide relief to those facing difficulties in servicing their payments due to cash flow and income disruptions. However, experts warn that this comes with certain negative implications.
Naveen Kukreja, CEO and co-founder, Paisabazaar advises against availing moratorium on credit card dues.
"This is because interest will keep on adding because of the deferment and credit card interest is very high," he explains.
The finance charges on outstanding credit card bills can range anywhere from 24-49 percent.
"Credit card holders availing the 3-month moratorium extension will end up accumulating another 6-12 percent of their outstanding bill amount as an additional liability,” explains Kukreja.
Adhil Shetty, CEO, BankBazaar says, “Don’t let dues pile up too high. Keep paying due in full wherever you can.”
Credit card holders unable to repay their credit card bills in entirety can, nevertheless, convert their unpaid bill into EMIs.
"Such EMI conversions come with significantly lower interest rates and their tenures too can go up to 5 years. This will ensure staggered repayment of their outstanding dues in smaller tranches in the form of EMIs, as per their repayment capacity," adds Kukreja.
One can also defer payment by paying the 'minimum due amount' and roll over the balance outstanding amount to the next month.
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