Credit Card Interest Rates

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What is Credit Card Interest Rate

The rate at which a credit card company charges interest on your borrowings is known as the credit card interest rate. Also referred to as finance charges, the rate of interest on credit cards is usually expressed in the form of an Annual Percentage Rate (APR).

 

Credit card companies usually charge different rates of interest depending on your usage. For instance, the interest charge on a credit card will be different for purchases, loans, cash advances, and EMIs.

 

Although the rate of credit card interest can vary from one type of card to another, it is not dependent on the user’s credit score or history. This effectively means that two different individuals with varying credit scores holding the same credit card would be charged the same amount of interest.

How to Calculate Credit Card Interest Rate

You can use an online credit card interest calculator to arrive at the interest charged on a credit card. Alternatively, you can also do it manually through the use of a specific formula to arrive at the credit card monthly interest. Here’s a closer look.

Formula to Calculate Credit Card Interest Rate

The formula that’s typically used to calculate credit card interest is as follows -

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

For instance, let’s say that you’ve spent Rs. 20,000 to purchase some products through your credit card. And that the total number of days from the first transaction date to the credit card payment due date is 28 days. The interest rate charged by the credit card provider is 3% per month. So, by applying the formula, we get the credit card interest as -

Credit card interest = [(28 x Rs. 20,000 x 36% p.a)] ÷ 365 days = Rs. 552.33.

When is the Credit Card Interest Rate Charged

The credit card monthly interest rate is charged only under the following circumstances -

 

  • When you repay only the minimum amount due on the card

  • When you pay an amount that is lower than the outstanding due

  • When you do not make your credit card payment

  • When you use your credit card to withdraw cash from an ATM

  • When you purchase items on EMI

Credit Card Interest Rate Charged by Top Banks

Credit card interest rate, also known as a ‘finance charge’, is the rate that the card issuers charge on the borrowed amount and is depicted as an annual percentage rate or an APR. However, these interest rates apply to those cardholders whose outstanding amount has not been paid in full each month and vary across different credit cards. 

Bank Name

Monthly Interest Rate

Annual Interest Rate

State Bank of India

3.50%

42%

Citibank

3.75%

45%

Axis Bank

3.60%

52.86% 

RBL Bank

3.99%

47.88%

 

HDFC Bank

On InterMiles HDFC Bank Diners Club / Diners Black / Infinia cards: 1.99% 

On other credit cards: 3.60% 

On InterMiles HDFC Bank Diners Club / Diners Black / Infinia cards: 23.88%

On other credit cards: 43.2%


 

 

 

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 by ICICI Bank: 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 Manchester United credit cards by ICICI Bank: 44.04%

On ICICI Bank Instant Platinum credit card / ICICI Bank Instant Gold credit card / Fixed Deposit Instant credit card: 29.88%

On other credit cards: 40.8% 

Interest Rate on Top Credit Cards in India 2022

Just like how the credit card interest rate per month varies from one bank to another, the rates may also vary depending on the type of credit card that you opt for. Here are a few of the top credit cards in India in the year 2022 and the credit card interest rates for the same.

Credit Cards

Credit Card Interest Rate

SBI Card ELITE

3.50% per month (42% per year)

Flipkart Axis Bank credit card

3.40% per month (40.8% per year)

HDFC Regalia credit card

3.60% per month (43.2% per year)

Amazon Pay ICICI credit card

3.50% to 3.80% per month (42% to 45.6% per year)

Citi PremierMiles credit card

3.75% per month (45% per year)

HDFC Millennia credit card

3.60% per month (43.2% per year)

HSBC Cashback credit card

3.49% per month (41.88% per year)

Axis Bank Ace credit card

3.60% per month (43.2% per year)

Standard Chartered Digismart credit card

3.75% per month (45% per year)

Disclaimer: The credit card interest rate offers would be from partner banks and NBFCs and not from Bajaj Markets.

List of Low-Interest Rate Credit Cards in India

There are several banks that 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

2.49% per month (29.88% per year)

Bank of Baroda Signature Visa credit card

2.60% per month (31.2% per year)

What is a Credit Card Interest Free Period

The period of time between the date of a particular transaction to the next payment due date is usually termed as the credit card interest free period. During this grace period, no interest is charged on the transaction amount.

 

Generally, the credit card interest free period is around 45 to 50 days. However, it may vary depending on the bank from whom you’ve availed your credit card from. This interest free period is only applicable on purchases that you make using your credit card and not on any cash advances, loans, or balance transfers.

 

Also, the credit card interest free period will be cancelled if you fail to pay your outstanding dues in full before the due date. In such cases, interest will be charged on your outstanding amount as well as on any new purchases that you may make.

What is a Credit Card EMI Calculator

When you make any big ticket purchases using your credit card, you usually get the option to convert it to EMIs. But how do you know just how much of an EMI you would have to pay each month if you choose to avail this option? Here’s where a credit card EMI calculator comes into the picture.

 

It is an online tool that allows you to determine just how much your monthly EMI is likely to be based on a few factors like the amount of transaction, the tenure, and the interest rate. All that you would have to do is enter the above details on a credit card EMI calculator and it will display the monthly instalment that you will have to pay.

Important Points About Credit Card Interest Rates

When it comes to credit card interest, there are a few things that you should always keep in mind. Check out some of the most important points down below.

 

  • You can use the credit card interest free period to your advantage by paying all of your outstanding dues before the due date.

  • Paying your dues after the due date may attract interest and penalty charges.

  • Credit card interest rates are levied on the balance outstanding amount.

  • To enjoy low interest rates on your credit card, you can choose to convert your purchases to EMIs. 

FAQs on Credit Card Interest Rate

  • ✔️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.

  • ✔️Do I pay APR if I pay on time?

    No. You won’t have to pay the APR if you pay all of your outstanding dues in full before the due date. 

  • ✔️Do credit cards have a high interest rate?

    Yes. Credit cards generally come with high interest rates ranging from 1.50% per month to 3.75% per month.

  • ✔️Does the rate of interest for credit cards change frequently?

    It is quite possible that the rate of interest may change frequently depending on the issuing bank or financial institution.

  • ✔️Why is the credit card interest rate so high?

    Credit card interest rate is high because of the risk it poses to a bank. If a cardholder delays the payment or is not able to make the payment at all, the bank has to bear the burden of the payment.

  • ✔️Do I have the option of paying my credit card balance in instalments?

    Yes, you can pay your credit card balance in equated monthly instalments (EMIs) which would mean converting your credit card outstanding amount into a loan.

  • ✔️Do all credit cards have an interest-free period?

    It is not necessary that all cards have an interest-free period as it totally depends on the issuing bank.

  • ✔️What is the typical interest rate 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.

  • ✔️Difference between a 0% credit card and a low-interest card?

    A 0% interest credit card can be a lifesaver if you have to make a high-ticket purchase whereas a low-interest credit card can help the cardholder with a longer-term debt reduction strategy.