RBI Empowers Credit card holders with Flexible Billing Cycles and Due Dates

The Reserve Bank of India (RBI) has introduced a welcome change for credit card users in India, offering them more control over their finances. This new regulation allows cardholders to choose their billing cycle and payment due date, providing greater flexibility in managing their credit card payments.

No More Fixed Due Dates: Tailoring Bills to Your Cash Flow

Previously, credit card bills arrived with a fixed due date set by the issuer, often coinciding with the end of the month. This could create a challenge for cardholders who might face a cash crunch at the month's end when their next salary is still awaited.

The new RBI regulation empowers cardholders to select any date as the starting or closing point of their billing cycle, at least once. This allows for greater flexibility in aligning the due date with their financial situation.

For example, by choosing the 1st or 2nd of the month as the bill generation date, the due date would fall between the 10th and 15th, potentially coinciding better with when a salary arrives.

Benefits for Existing and New Cardholders

This increased control over billing cycles extends to both new and existing credit cardholders. As Moin Ladha, Partner at Khaitan & Co., points out, "Both the new and existing cardholders can change the date of the billing cycle more than once." This flexibility empowers cardholders to tailor their billing cycle to their specific cash flow patterns.

Advantages of Flexible Billing Cycles:

• Improved Financial Management: Aligning due dates with regular income allows for better budgeting and timely payments, potentially reducing late fees and interest charges.

• Synchronized Due Dates: Multiple cardholders in a household can choose the same due date, simplifying overall credit card management.

How to Choose Your Billing Cycle:

Cardholders should strategically select their billing cycle to ensure sufficient funds are available in their bank accounts to cover both the credit card payment and other monthly expenses. This proactive approach can help them avoid penalties and interest charges.

Additional Cardholder Empowerments by RBI

This is not the only way the RBI is empowering credit card users. Another new regulation allows cardholders to choose their preferred card network, such as Visa, Mastercard, RuPay, Diners Club International, or American Express (with some exceptions). Previously, the card network was predetermined by the issuer.

Going forward, new cardholders will be presented with a choice of networks at the time of issuance. Existing cardholders may be offered this option during their next renewal. This empowers users to select a network that best suits their spending habits and potential network-specific benefits.

Important Reminders for Credit Card Users:

• Credit Card Debt: Using a credit card essentially incurs debt, as the issuer provides a loan that needs to be repaid. Failing to pay the full outstanding amount by the due date results in interest charges on the unpaid balance.

• Minimum Payment Trap: The RBI mandates that credit card issuers clearly inform cardholders about the implications of paying only the minimum amount due. Billing statements will now prominently display a warning explaining that consistently paying only the minimum amount can lead to extended repayment periods and significant interest charges due to compounding.

• Interest-Free Period: The RBI also reminds cardholders that the interest-free credit period offered by many cards is suspended if any balance from the previous month's bill remains unpaid.

These new regulations from the RBI empower credit cardholders in India with greater control over their finances. By offering flexible billing cycles, due date selection, and network choice, cardholders are better equipped to manage their credit card usage responsibly and avoid potential pitfalls.