Credit Card Interest Rate - What is Interest Rate & How does it work?

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On your credit card, the interest rate you are charged pertains to the rate applicable on your unpaid balance. The interest rate of credit cards varies depending on the issuer that you choose.

The credit card interest is payable if you do not clear your dues before the stipulated date. Every credit card comes with an interest-free period that ranges between 18 and 50 days. The card issuer will not charge any interest if you pay your outstanding balance within this interest-free period.

Hence, it is advisable to clear the remaining amount before the due date to avoid paying credit card interest charges.

How to Calculate the Credit Card Interest Rate

Learning how to calculate credit card interest can help you easily manage your payments, and here is the formula that you can use.

Credit card interest = (Days from the Last Transaction Date x Outstanding Amount x Credit Card Interest Rate Per Month x 12 Months) ÷ 365 Days

Let’s take an example to understand how to calculate credit card interest rates under different circumstances.

Transaction Date	May 1st, 2023
Amount	₹10,000
Statement Date	May 6th, 2023
Minimum Amount Due (5%)	₹500
Due Date	May 26th, 2023
Monthly Interest	3%

1. Scenario 1: You pay the due bill in full on May 21st (before the due date).

The net interest payable would be zero.

2. Scenario 2: You make a partial payment before the due date.

Let’s assume a partial payment of ₹5,000 is made on May 21st, and no transactions happen before the next statement date, i.e., June 6th.

Interest is charged on ₹10,000 for 21 days (from May 1st to May 21st) and on the remaining ₹5,000 balance for 15 days (from May 22nd to June 6th).

Interest charged on ₹10,000 for 21 days: [(21 x 10000 x 3% x 12)] ÷ 365 days = ₹207.12.
Interest charged on the ₹5,000 balance for the next 15 days: [(15 x 5000 x 3% x 12)] ÷ 365 days = ₹73.97.
Total interest payable: ₹207.12 + ₹73.97 = ₹281.09.

3. Scenario 3: You make a partial payment after the due date.

Let’s assume you pay ₹5,000 on May 28th and make no subsequent transactions on the card until the next statement date, i.e., June 6th.

Interest is charged on the initial sum for 28 days (May 1st to May 28th) and on the balance for 9 days (from May 28th to June 6th).

Interest charged on ₹10,000 for 28 days: [(28 x 10000 x 3% x 12)] ÷ 365 days = ₹276.16.
Interest charged on the ₹5,000 balance for the next 9 days: [(9 x 5000 x 3% x 12)] ÷ 365 days = ₹44.38.
Total interest payable: ₹276.16 + ₹44.38 = ₹320.54.

4. Scenario 4: You make partial payment after the due date and make fresh transactions

Let’s assume you make fresh transactions of ₹2,000 on May 15th. Then,

Interest charged on the outstanding balance for 15 days: [(15 x 10000 x 3% x 12)] ÷ 365 days = ₹147.94.
Interest charged on new outstanding balance with a fresh transaction for 13 days: [(13 x 12000 x 3% x 12)] ÷ 365 days = ₹153.86.
Interest charged on balance after partial payment for 9 days: [(9 x 7000 x 3% x 12)] ÷ 365 days = ₹62.13.

Total interest payable: ₹147.94 + ₹153.86 + ₹62.13 = ₹363.93

Credit Card Interest Rate Charged by Some of the Top Banks

Bank Name	Monthly Interest Rate	Annual Interest Rate
State Bank of India	Up to 3.50%	Up to 42%
Axis Bank	1.50%-3.60%	19.56%-52.86%
RBL Bank	3.99%	47.88%
DBS	3.75%-4%	45% for customers with an existing credit card history. 48% for customers without an existing credit card history.
ICICI Bank	On InterMiles ICICI Bank credit card / MakeMyTrip ICICI Bank credit card / ICICI Bank HPCL Super Saver credit card: 3.50% On Manchester United credit cards/ Emirates Skywards ICICI Bank Sapphiro credit card/ Emirates Skywards ICICI Bank Emeralde credit card/ Emirates Skywards ICICI Bank Rubyx credit card: 3.67% On ICICI Bank Instant Platinum credit card / ICICI Bank Instant Gold credit card / Fixed Deposit Instant credit card: 2.49% On other credit cards: 3.40%	On InterMiles ICICI Bank credit card / MakeMyTrip ICICI Bank credit card / ICICI Bank HPCL Super Saver credit card: 42% On Manchester United credit cards/ Emirates Skywards ICICI Bank Sapphiro credit card/ Emirates Skywards ICICI Bank Emeralde credit card/ Emirates Skywards ICICI Bank Rubyx credit card: 44% On ICICI Bank Instant Platinum credit card / ICICI Bank Instant Gold credit card / Fixed Deposit Instant credit card: 29.88% On other credit cards: 40.80%

Cards with Some of the Lowest Interest Rates in India

Several banks offer some of the lowest interest rate credit cards in India. Check out the table below to get a better idea.

Credit Cards	Credit Card Interest Rate
Kotak Mahindra Best Price – Premium Card	1.50% per month (18% per year)
HDFC Diners Club Black credit card	1.99% per month (23.88% per year)
HDFC Infinia credit card - Metal Edition	1.99% per month (23.88% per year)
ICICI Bank Instant Platinum credit card	3.50% per month (29.88% per year)
Bank of Baroda Signature Visa credit card	2.60% per month (31.2% per year)

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The information provided by BFDL herein above is related to the Non-Partnered Banks/ NBFCs and is just for information and under no circumstances the information provided hereinabove is intended to be the source of advice or recommending any financial advice or endorsement of any sort.

The information including interest rates or fees and charges concerning any credit card, provided on this website is gathered through publicly available sources over the internet and is considered accurate and reliable to the best of our knowledge. BFDL disclaims any responsibility or liability regarding inaccuracies, omissions, mistakes etc. as well as offers by the Non-Partnered Banks or NBFCs. The use of information set out is entirely at the User’s own risk and the User should exercise due care prior to taking any decision, based on information mentioned hereinabove. You are advised to visit/ contact the respective Banks/ NBFCs to verify the information before making any application or opening an account. Further, BFDL does not undertake any responsibility or liability to update this information. YOU ARE SOLELY RESPONSIBLE FOR ANY LIABILITY OR DAMAGE YOU INCUR THROUGH ACCESS TO OR USE OF THE SITE OR SUCH INFORMATION OR MATERIALS EXCEPT WHERE THE LAWS AND REGULATIONS OF A PARTICULAR JURISDICTION CONCERNING WARRANTIES CANNOT BE WAIVED. Additionally, display any trademarks, trade names, logos and other subject matters of intellectual property owners. Display of such Intellectual Property along with the related product information does not imply BFDL’s partnership with the owner of the Intellectual Property of such products.

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Will interest be applied even if the minimum amount due is paid every month?

Credit card loan interest will be levied if you fail to clear the outstanding dues in full. That is to say, if you pay the minimum amount due on your card, you will still have pending dues and hence will be charged the interest rate.

What is the usual interest rate on a credit card?

The credit card interest rate in India tends to vary depending on the type of card you own and the card issuing bank. However, it generally tends to be between 2.5% to 3.5% per month (30% to 42% per annum) for most cards.

Does the rate of interest for credit cards change frequently?

The rate of interest may change frequently depending on the issuing bank or financial institution.

Do all credit cards have an interest-free period?

Not all cards need to have an interest-free period, as it depends on the issuing bank.

What are the typical interest rates on a credit card?

Interest Rates usually vary from 2.5%- 3.5% per month, and it completely depends on the issuing bank as well as the type of credit card. It is always advisable to choose a card with a low-interest rate.

What is a Credit Card Interest-Free Period?

A credit card’s interest-free period is the time between the transaction date and the next payment due date.

As the name suggests, no interest is levied on the due amount during this grace period. Depending on your lender, interest-free periods can range from 18-55 days.

Credit card interest-free periods are not valid on transactions like cash advances, balance transfers, etc. You can enjoy interest-free credit if you pay your outstanding dues in full before the due date.

If you fail to do so, the interest-free period will be cancelled, and you will have to pay add-on charges on the closing balance and all new purchases made with the card.

What is a Credit Card EMI Calculator?

Credit cards allow you to convert purchase costs into manageable EMIs. A credit card EMI calculator is a digital tool that helps you calculate your monthly repayment burden for EMI purchases made using a credit card.

This online tool calculates the EMI due on your credit card based on basic parameters like the transaction amount, tenure, and interest rate. Like all EMI calculators, this digital tool helps you plan your finances and budget them well ahead of time.

Is 12% interest high on a credit card?

No. A 12% per annum interest rate on credit cards is low and very attractive. However, it is important to note that it is always a good idea to pay your outstanding balances in full each month. This way, you can avoid paying credit card interest.

Carrying over unpaid balances even for a few months can quickly lead you into a debt trap. If you find yourself carrying unpaid outstanding balances on your credit card, consider paying them off using a debt consolidation loan.

What is the interest rate on Kotak credit cards?

The interest rate on Kotak Mahindra Bank Credit Cards tends to vary depending on the type of card. For most Kotak Credit Cards, the interest rate is 3.50% per month (42% per annum).

However, for Kotak Signature, Kotak Infinite, Kotak NRI Royale Signature and Kotak White Signature cards, the interest rate is 3.10% per month (37.20% per annum).

For the Kotak Privy League Signature card, the interest rate is even lower at just 2.49% per month (29.88% per annum). And finally, for the Kotak Myntra Kotak Credit Card, the rate is 3.70% per month (44.40% per annum).

Is a credit card interest rate monthly?

Yes. Card issuers generally express the credit card interest rate on a per-month basis. However, you will be charged interest on unpaid balances daily and not monthly.

When do credit card charges kick in?

The credit card interest rate is generally charged monthly when you pay only the minimum due amount.

Also, in case you do not make your credit card payment or only pay a portion of it, you’ll have to pay interest. These charges also kick in if you withdraw cash from an ATM or purchase an item on EMI.