Credit Card Interest Rate

The credit card interest rate or the finance charge is a charge that is levied by your credit card issuer against the expenses made on your card. It varies between credit card issuers and can even vary between cards offered by the same issuer. Unlike other forms of loan interest, the credit card interest rate is fixed for a card and does not vary basis the credit score or history. It is important for a user to know about the associated interest rate to ensure maximum savings.

When is the Credit Card Interest Rate Charged?

Credit card monthly interest rate is charged under the following circumstances-

  • You repay only the minimum amount due on the card

  • You pay an amount that is lower than the outstanding due

  • You do not make any credit card payment

  • You use your credit card to withdraw cash from an ATM

  • You purchase items on EMI

How is the Credit Card Loan Interest Rate Calculated?

The credit card interest rate calculator can be used to figure the interest you are likely to pay on the balance due on the card. The formula used by the credit card interest rate calculator is mentioned below-

Credit card interest per month= [(Total number of days x Transaction amount x credit card interest rate per month x 12 months)] / 365 days

If you do not have access to a credit card monthly interest calculator, you can still calculate the monthly interest charge on your credit card by using the same formula.

Let us consider an example to understand it better:

Interest rate charged on credit card

3.35% per month / 40.2% per year

Date of Transaction

15 November 2019

Amount Transacted

INR 6,000

Date of Transaction

20 November 2019

Amount Transacted

INR 6,000

Date of Statement Generation

2 December 2019

Total Due Amount

INR 12,000

Minimum Amount Due

INR 5,000

Payment Due Date

22 December 2019

Partial Payment Date

22 December 2019

Next Statement Date

2 January 2020

i) Credit card interest charged on the first transaction, for the period between the date of the transaction to the payment due date:

(Days between the first transaction date and the payment due date x Total amount spent x credit card interest rate per annum) ÷ total number of days in a year

(38 x 6,000 x 40.2%) ÷ 365= INR 251.11

ii) Credit card interest charged on the second transaction, for the period between the date of the transaction to the payment due date:

(Days between the second transaction date and the payment due date x Total amount spent x credit card interest rate per annum) ÷ total number of days in a year

(33 x 6,000 x 40.2%) ÷ 365= INR 218.07

iii) Credit card interest charged on the outstanding balance, for the period between the date of partial payment to the date when the next statement is generated:

(Days between the partial payment clearing date and the next statement generation date x Outstanding balance on the card x credit card interest rate per annum) ÷ total number of days in a year

(10 x 7,000 x 40.2%) ÷ 365 = INR 77.09

The total interest charged will be INR 546.27

Bank-wise Credit card Interest Rate

The interest fee on credit cards varies from one bank to another. To give you an idea about the same, here is a list of credit card interest charges levied by some of the popular banks in the country.

Bank Name

Credit Card Interest Rate

State Bank of India

3.35% per month/ 40.2% per year

Citibank

3.50% per month/ 42.00% per year

Axis Bank

3.4% per month / 49.36% per year

RBL Bank

3.99% per month/ 47.88% per year

What is a Credit Card Interest Free Period?

The credit card interest free or grace period is the time span between the date of the transaction and the next payment due date when no interest is charged on the card. As this tenure varies from bank to bank, you must take this into account while you apply for a credit card. Here, it is also important to note that the credit card interest free period is only applicable to new purchases but does not cover cash advances or balance transfers. The grace period will also be canceled if the outstanding dues of the past month are not cleared in full. In such a case, you will be charged interest in the balance as well as the new purchases.

What are the Important Factors to Keep in Mind About Credit Card Interest Rates?

Here are a few things you should know about the interest charge on credit cards.

  1. You can avail the advantages of a credit card interest free period if you pay the outstanding amount in full before the end of the due date.

  2. The payment due date mentioned on your credit card statement is critical to remember as payments made, post that it will attract penalty charges.

  3. To do away with paying interest on credit cards, ensure that you pay back your dues within the credit card interest free period.

  4. The Annual Percentage Rate (APR) is levied on the credit card balance as interest.

  5. Availing the EMI scheme can help you enjoy the lowest interest rate on your credit card balance.

Frequently Asked Questions

  • ✔️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, that 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 annual interest rate depends on the card type and the issuing authority. Different banks have different credit card interest rates. You can compare credit card interest rates and select the one that works for you.

  • ✔️When should I pay a credit card bill to avoid interest?

    You should pay the credit card bill in full before the payment due date, every month, to avoid interest charges on the credit card.

  • ✔️How does the interest charge on a credit card work?

    CC interest rate is charged on the pending credit card bill based on the following formula-

    [(Total number of days x Transaction amount x Interest rate per month x 12 months)] / 365 days

    You can also use the credit card interest calculator available online to calculate the credit interest rate charged on your card.

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