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Credit Card to turn you into NPA in 90 days

Your bank will classify you as a Non-Performing Asset (NPA), if you don't pay the "specified" credit card dues, within a "specified" period.

You will have to pay late payment charges and your name would be reported to the Credit Information Companies, if your credit card account remains overdue beyond a "specified" period.

Let's look at what norms RBI has laid down, in this regard, vide its notification 'Prudential Norms on Income Recognition, Asset Classification and Provisioning pertaining to Advances – Credit Card Accounts'.

But before that:

As you are aware, all your purchases against the credit card during a given period (usually around a month), are consolidated and a single credit card statement is generated.

This is payable by you on a specified due date, typically around 15-20 days after the bill generation.

However, there is NO compulsion on you to pay off the "entire" amount due, on or before the due date. 

You can pay only a nominal amount (typically just 5% of the total bill amount), called the Minimum Amount Due, and can carry forward the balance outstanding dues to the next month. And you can continue doing this month after month after month...

BEWARE: You should NEVER resort to this rollover of your credit card outstanding amount.

credit-card-warning
Don't be casual about your credit card bills; they could destroy you.

MUST READ before your proceed further:
Minimum Amount Due Means Maximum Financial Destruction
Credit Card Mistakes That You Must Avoid

Coming to the recent RBI notification:

1. You will classified as a Non-Performing Asset by your bank, if you DO NOT pay even the nominal Minimum Amount Due, in full, within 90 days from the payment due date mentioned in the statement. 

Earlier, this period worked out around 120 days, as the overdue days was computed from the "next" credit card statement date.

2. Further, your default in payment would be reported as ‘past due’ to the credit information companies and you would be liable for the penal late payment charges, when a credit card account remains ‘past due’ for more than three days

This number of ‘days past due’ and the penalty on late payment shall be calculated from the payment due date mentioned in the credit card statement.

RBI's intention behind the aforesaid provisions is two-fold...
i.  it wants to bring about greater credit disciple among the users and
ii. provide greater operational flexibility to the credit card issuers

Credit cards are extremely dangerous. In fact, given the extent of damage they have caused in the US, they are rightly termed as Weapons of Mass Financial Destruction. Fortunately, in India the credit card penetration is still quite low, and our values still deter us from living our life on credit. But, if we are not careful, we may too soon go the US way.

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