The extension of the moratorium on term loans by another three months till August 31 is a big relief for many borrowers but experts advise that you should avoid it for outstanding credit card dues.

With finance charges anywhere between 24 per cent and 49 per cent for credit card dues, it may be better to either pay off the outstanding amount or convert into an EMI, if possible.

“Credit card holders should avoid availing the moratorium on their credit card dues. The finance charges on outstanding credit card bills can range anywhere from around 24 per cent and 49 per cent per annum. Credit card holders availing the three-month moratorium extension will end up accumulating another per cent to 12 per cent of their outstanding bill amount as an additional liability,” said Naveen Kukreja, CEO and Co-Founder, Paisabazaar.com.

EMI conversions come with significantly lower interest rates and their tenures too can go up to five years, he further noted.

Pranjal Kamra, CEO, Finology also recommended that individuals should not apply for the credit card moratorium if possible, because the deferment has a high cost.

“You will get three months extra to pay off but the interest burden will be quite high as compared to other types of loans (such as house loan or a vehicle loan). An average extra interest burden that you would have to bear would be somewhere between 25 and 30 percent,” he noted.

With the national lockdown continuing, the Reserve Bank of India had, on May 22, extended the loan moratorium, which was set to end on May 31, by another three months.

Experts however, said that taking the moratorium will not impact the credit score.

Sathya Kalyanasundaram, Country Head and Managing Director, Experian India said, “This step will provide some respite to consumers affected by the Covid-19 pandemic. It is important to note that while opting for the moratorium will not affect the credit score negatively; interest will continue to accrue during this period.”

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