Module: | Capital Adequacy, Basel Norms & Monetary Policy
Q15: Which of the following statements regarding credit card billing, payment terms, and interest calculations are correct?
1. The "Interest-Free Credit Period" is applicable only if the cardholder pays the entire outstanding amount on or before the due date, not just the Minimum Amount Due.
2. To prevent "negative amortization," the Minimum Amount Due (MAD) must be calculated to cover at least the interest and other charges preventing the balance from increasing.
3. Card-issuers must ensure a gap of at least one fortnight (14-15 days) between the date of billing statement generation and the payment due date.
4. Late payment charges must be levied on the total amount due, irrespective of any partial payments made.
Which of the statements given above is/are correct?
2. To prevent "negative amortization," the Minimum Amount Due (MAD) must be calculated to cover at least the interest and other charges preventing the balance from increasing.
3. Card-issuers must ensure a gap of at least one fortnight (14-15 days) between the date of billing statement generation and the payment due date.
4. Late payment charges must be levied on the total amount due, irrespective of any partial payments made.
Which of the statements given above is/are correct?
✅ Correct Answer: B
The correct answer is B. Statement 1 is correct: The "Interest-Free Credit Period" is strictly applicable only if the cardholder pays the entire outstanding amount on or before the due date.
Paying just the Minimum Amount Due revokes this privilege.
Statement 2 is correct: To prevent "negative amortization" (where the debt grows despite payments), the Minimum Amount Due (MAD) must be calculated to cover at least the interest and other charges levied during the cycle.
Statement 3 is correct: RBI Directions mandate that card-issuers must ensure a gap of at least one fortnight (14-15 days) between the date of billing statement generation and the payment due date to give customers adequate time to pay.
Statement 4 is incorrect: Late payment charges must be levied ONLY on the outstanding amount after adjusting for any partial payments made, not on the total amount due.
Paying just the Minimum Amount Due revokes this privilege.
Statement 2 is correct: To prevent "negative amortization" (where the debt grows despite payments), the Minimum Amount Due (MAD) must be calculated to cover at least the interest and other charges levied during the cycle.
Statement 3 is correct: RBI Directions mandate that card-issuers must ensure a gap of at least one fortnight (14-15 days) between the date of billing statement generation and the payment due date to give customers adequate time to pay.
Statement 4 is incorrect: Late payment charges must be levied ONLY on the outstanding amount after adjusting for any partial payments made, not on the total amount due.