With Coronavirus infection showing no signs of abating anytime soon, the lockdown is extended till May 3, 2020, across India. While all authorities are trying their best to resume normal economic activities, it might take several months for actual normalcy to return. Thus, as important as is to stay home and keep yourself and the family safe from pandemic as is managing your finances and battle down COVID19 induced financial crisis in your life. Particularly, you need to manage your loan EMIs & Credit Card bills carefully!
Effect of lockdown on payment of EMIs/ Bills
During the nationwide lockdown, all companies have been directed by the government to allow the employees to work from home. But many job profiles can not be handled while working remotely, which may soon cause mass lay-offs in the coming days. Moreover, with almost all major countries reeling from the effect of the COVID-19 pandemic, economic activities have come to a grinding halt. Consequently, several companies have sent their employees on compulsory leave, without pay.
Moreover, all businesses and shops, other than categorized as “essential services” have been shut since the commencement of the lockdown, and has resulted in a standstill of economic activity. Now that the primary source of income for numerous individuals has been affected, it is becoming increasingly difficult for everyone to take care of their financial commitments, such as EMI Payments and Credit Card Bills.
Dealing with a high Credit Card Bill during the Lockdown2
When people are focused on taking care of their essential expenses, payment of Credit Card bills can become a big challenge. It, therefore, becomes imperative for you to plan your finances accordingly so that this challenge can be managed effectively.
Here are some useful tips to help you manage your high Credit Card Bill amidst income loss during the lockdown:
- Do not apply for a new Credit Card: Now is not the time to look out for more Credit Cards; instead, it is time for you to minimize your spending. The income loss you are suffering due to the lockdown is quite significant and requires you to observe some austerity measures for the time to come. Apply for Credit Cards only if you are looking for a balance transfer to a new card to reduce your interest costs. Stay home, stay safe, and stay away from unnecessary spending for the time being.
- Use Moratorium Period: Well, the immediate solution available to you is to avail the three-month moratorium period offered by the Reserve Bank of India. As per the guidelines of RBI, you are allowed to not pay your Credit Card Bill for three months, i.e., till 30th June 2020. During this period, if you do not pay your card outstanding, you will not be subjected to any late payment charges. So, avail of this facility to get some respite from the looming card bills. But, do remember that during this period, the interest will continue to accrue against the outstanding dues. Therefore, you must try to repay the dues as soon as possible. Do not wait till the end of the moratorium period just because it is available; otherwise, the interest burden will be too much for you.
- Realign your investments: Due to uncertainty in the economic environment globally, financial markets are experiencing extreme volatility. You must use this opportunity to realign your investment portfolio to generate some liquidity. These funds can then be used to repay your Credit Card dues. There is a simple rationale behind this suggestion. The interest rate applicable against your Credit Card dues will range between 3.5% to 4% per month, i.e., between 42-48% per annum. In the present market situation, no investment avenue will offer you such returns. So, your money will be better utilized in repaying your Credit Card dues.
- Plan repayments: If you have opted for the three-month moratorium period, you must use this time to plan the repayments. While the moratorium will end on 30th June 2020, the government is planning to resume economic activity in the country in the month of April itself. So when the work resumes, there will be a time of a few weeks for you to start the repayment of your Credit Card dues. You can use this time to plan your bill repayments and start saving the money accordingly. If possible, start repaying the Credit Card bill as soon as you restart working.
- Use money saved for repayment: During the lockdown, you are not allowed to go anywhere outside. As a result, you must be saving some money which otherwise would have been spent on shopping or leisure activities. Moreover, you will also be saving money on fuel costs and transportation expenses. Also, all your holiday plans or big-ticket purchases might be delayed for several months. You can use all these savings to repay your Credit Card dues and thereby save on the interest cost.
- Minimize your expenses: As and when the lockdown is lifted, you should not go on a spending spree. Instead, you should prioritize your expenses according to their importance and avoid leisurely or unnecessary expenses completely. The global economic environment might take several months or even years to return to pre-coronavirus times. So, during this period, you must minimize your expenses and try to generate as much spare funds as you can. Moreover, avoid making new transactions on your Credit Card and instead focus on repaying the entire dues.
Desperate times call for desperate measures. The economic uncertainty resulting from the Coronavirus pandemic is very serious and requires you to prioritize your spending. Follow the tips mentioned above to effectively manage your credit card bills during these tumultuous times and wait for normalcy to return.
Also Read: 3 Tips for Young Earners to Maintain a Healthy Credit Score
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