Priyanka Sambhav
Supreme Court, while hearing the loan moratorium matter made an important observation. The apex court asked why should the credit card user get the benefit of compound interest waiver, because they are not borrowers, “They don’t have a loan, they’re purchasing,” observed Justice MR Shah.
RBI had granted a 6-month moratorium to borrowers and credit card users during the COVID -19 lockdown period from March-August 2020. The borrowers and credit card holders were allowed to defer their loan/due payment by 6 months. The moratorium was a postponement and not a waiver so the interest on the loan/due accrued for these six months to the principal amount of the outstanding amount.
A batch of petition praying for extension of moratorium was filed which also argued that taking interest on interest during the moratorium months defeated the purpose of the moratorium. On Supreme Courts’ insistence government came up with a relief plan. The Interest waiver scheme of the government took away the pain of compound interest from the moratorium period. ‘Interest on Interest’ was set aside for retail borrowers and small business units who have loans up to Rs 2 crore. The government made this scheme applicable to all the borrowers and credit card user whether they availed moratorium or not.
The ex-gratia money was credited by banks to all the borrowers including the credit card users. In many cases, it was not a big amount but it was given back to all the borrowers.
Now in the ongoing hearing, Supreme Court has raised a point if credit card users are entitled for this compound interest waiver? If you are a credit card user you would have got back the compound interest portion but you need to carefully handle the outstanding and follow a discipline while dealing with the credit cards. If you are struggling with high debt on the credit card then its advisable to look for ways to repay this. Here are a few options that you should think about for lightening your credit card burden-
1. Avail’ Convert to EMI’
All the credit card companies and banks give the facility to avail ‘convert to EMI’ option on your credit card outstanding. Pay the due with the help of EMI’s and you should choose this because the rate of interest on these EMIs are lower as compared to the higher interest which you pay on outstanding amount.
2. Take a personal loan
It may not look like a good time to take a new loan, but if this is what it takes to get out of the credit card debt trap, then this is what you must do. However, the rate of interest on personal loans are also on a higher side, but it is lower than the interest that you pay on a credit card due. With a personal loan, you can settle the credit card due in one go and close it. You won’t be tempted to use it for further purchases and will be spared from accumulating more to existing outstanding.
3. Use the Balance Transfer Method
You could transfer the outstanding balance of a high-interest credit card to another credit card at a lower interest rate. This has been one of the most widely used ways to reduce credit card debt. There are always many credit card companies in the market offering low-interest cards or zero annual charges, and you could avail one of these cards to lower your burden.
Don’t reel under the pressure of the credit card debt but look for ways to come out of it. You need to attack the debt rather get bogged down by it. If you don’t want to take an additional loan or card to reduce the debt burden, then make a plan and start paying off the due with a targeted approach. You may choose the snowball method where you target the dues one by one. You start by paying off the smaller debt first and then reach the bigger ones. So stay focused and get rid of credit card debts with a plan.
