Understand how credit card interest rates work, how they are calculated, and when charges are applicable.
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The interest rate you are charged on your credit card is the rate applicable on your outstanding balance. This interest rate differs from one issuer to another and is payable if your dues are not cleared before the stipulated date. Every credit card has a defined interest-free period that ranges between 20 to 50 days. If you clear your outstanding balance within this period, no interest will be charged.
To maintain your financial health and avoid additional penalties, it is advisable to clear your outstanding amount before the due date.
Here are some of the top credit cards available in India for 2025. Apply for your next credit card on Bajaj Markets with ease and a simplified process. Compare and choose the one that best suits your needs:
Credit Card |
Interest Rates |
Bajaj Finserv |
Up to 4.00% per month or 40.00% per annum |
Axis Bank |
Up to 3.60% per month or 52.86% per annum |
IndusInd Card |
Up to 3.95% per month or 47.40% per annum |
ICICI Bank |
Up to 3.67% per month or 44.00% per annum |
SBI Card |
Up to 3.50% per month or 42.00% per annum |
Rupicard |
Up to 2.50% per month or 30.00% per annum |
AU Small Finance Bank |
Up to 3.59% per month or 43.08% per annum |
Learning how to calculate your credit card interest can help you manage your payments with ease, and here is the formula to do so:
Credit Card Interest = (Number of days counted since the date of the last transaction x Outstanding Amount x Interest Rate Per Month x 12 Months) / 365
Here is an example that will help you understand how to calculate your credit card interest rate under different circumstances:
Particulars |
Detail |
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% |
Scenario A: You pay the due bill in full on May 21st (before the due date)
In such a scenario, no interest charges would be applicable.
Scenario B: You make a partial payment before the due date
Assume that you made a part payment of ₹5,000 on 21st May, and no transactions were made before the next statement generation date, i.e., 6th June.
The interest will be charged on ₹10,000 for 21 days (from 1st May to 21st May) and on the remaining balance of ₹5,000 for 15 days (from 22nd May to 6th June).
Here is the calculation:
Interest charged on ₹10,000 for 21 days = [(21 x 10,000 x 3% x 12)] / 365
Interest charged on ₹10,000 for 21 days = ₹207.12
Interest charged on ₹5,000 for 15 days = [(15 x 5,000 x 3% x 12)] / 365
Interest charged on ₹5,000 for 15 days = ₹73.97
Total interest payable = ₹207.12 + ₹73.97 = ₹281.09
Scenario C: You make a partial payment after the due date
Assume that you made a payment of ₹5,000 on 28th May and no further transactions were made until the next statement generation date, i.e., 6th June.
The interest will be charged on the initial sum for 28 days (from 1st May to 28th May) and on the balance for 9 days (from 28th May to 6th June).
Here is the calculation:
Interest charged on ₹10,000 for 28 days = [928 x 10,000 x 3% x 12)] / 365
Interest charged on ₹10,000 for 28 days = ₹276.16
Interest Charged on the balance ₹5,000 for the next 9 days = [(9 x 5,000 x 3% x 12)] / 365
Interest Charged on the balance ₹5,000 for the next 9 days = ₹44.38
Total interest payable = ₹276.16 + ₹44.38
Total interest payable = ₹320.54
Scenario D: You make a partial payment after the due date and make fresh transactions
Assume that you make a new transaction of ₹2,000 on 15th May. The interest will be charged on the outstanding balance for 15 days.
The interest will be charged on the outstanding balance for 15 days.
Here is the calculation:
Interest charged on the outstanding balance for 15 days = [(15 x 10,000 x 3% x 12)] / 365 days
Interest charged on the outstanding balance for 15 days = ₹147.94
Interest charged on new outstanding balance for 13 days = [(13 x 12,000 x 3% x 12)] / 365 days
Interest charged on new outstanding balance for 13 days = ₹153.86
Interest charged on the balance post part payment for 9 days = [(9 x 7,000 x 3% x 12)] / 365 days
Interest charged on balance after partial payment for 9 days: = ₹62.13
The total interest payable for your credit card would be = ₹147.94 + ₹153.86 + ₹62.13
The total interest payable for your credit card would be = ₹363.93
Here are some of the credit card issuers available on Bajaj Markets offering the lowest interest rates:
Credit Card |
Interest Rates |
Rupicard |
Up to 2.50% per month or 30.00% per annum |
SBI Card |
Up to 3.50% per month or 42.00% per annum |
AU Small Finance Bank |
Up to 3.59% per month or 43.08% per annum |
Axis Bank |
Up to 3.60% per month or 52.86% per annum |
ICICI Bank |
Up to 3.67% per month or 44.00% per annum |
IndusInd Card |
Up to 3.95% per month or 47.40% per annum |
Bajaj Finserv |
Up to 4.00% per month or 40.00% per annum |
Interest rates on credit cards are charged when you fail to pay your total outstanding balance within the given due date. Credit card issuers typically provide an interest-free grace period ranging from 20 to 50 days, depending on the card and billing cycle. If you pay the full outstanding amount within this period, no interest is charged.
However, if you carry forward a balance into the next billing cycle, interest will be charged on the unpaid balance from the transaction date. Interest is also charged on:
Cash withdrawals made from an ATM using your credit card
Partial payments made on your bill
Balance transfer amounts
The interest rate applicable differs from one issuer to another and typically ranges between 1.5% to 3.5% per month (or 18% to 42% annually). It is crucial to understand that the interest will accumulate daily until the amount is paid in full. It is in your best interest to pay off the outstanding amount on time to avoid additional interest charges.
A credit card interest-free period is a set timeframe during which you can make purchases without incurring interest, provided you repay the total outstanding amount within that period. The interest-free period typically ranges from 20 to 50 days and may vary depending on your card issuer and billing cycle.
This period starts on the first day of your billing cycle and ends on your due date. If the amount is paid in full before the due date, you avoid any interest charges. However, if the balance is carried forward, interest will be charged from the transaction date.
Cash advances and overdue balances are not eligible for an interest-free period. Utilising this feature properly can help you manage your finances effectively.
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Frequently Asked Questions
Will interest be applied even if the minimum amount due is paid every month?
Interest charges will be levied on your credit card if you fail to clear the outstanding dues in full. Even if you pay the minimum amount due on your card, you will still have an outstanding balance; hence, interest will be charged on the same.
What is the usual interest rate on a credit card?
The interest rate on a credit card varies based on the issuer and the type of card you own. It typically ranges between 1.5% and 3.5% per month (or 18% to 42% per annum) for most credit cards.
Does the rate of interest for credit cards change frequently?
The interest rate for credit cards may change frequently depending on the bank issuing the credit card. These changes are made at the sole discretion of the issuer.
Do all credit cards have an interest-free period?
It is not necessary for all credit cards to have an interest-free period. The interest-free period depends on the issuing bank.
What are the typical interest rates on a credit card?
Interest rates on a credit card usually vary between 1.5% and 3.5% per month. It is entirely at the discretion of the issuing bank and the type of credit card you own. It is advisable to compare credit cards and choose one with the lowest possible interest rate.
What is a Credit Card Interest-free Period?
A credit card’s interest-free period is the duration between transaction dates and the upcoming payment due date. During this grace period, no interest is levied on the outstanding amount. Depending on the issuer, this interest-free period ranges between 20 to 50 days.
What is a Credit Card EMI Calculator?
A primary benefit of a credit card is that it allows you to convert purchases into manageable and affordable EMIs. Before converting, you can use a credit card EMI calculator to understand your monthly repayment obligation and plan your finances accordingly.
A credit card EMI calculator is a free-to-use online tool that helps you calculate the EMI due on your credit card. You are only required to fill in basic parameters such as transaction amount, tenor, and the interest rate, and the calculator will display your EMI.
Is 12% interest high on a credit card?
An Annual Percentage Rate (APR) of 12% on a credit card can be considered affordable and low. However, it is important that you pay your outstanding balance in full every month. This way, you can avoid paying any interest charges on your credit.
Carrying over any unpaid balance, even for a few months, can quickly land you in a debt trap. If you find yourself carrying over an outstanding balance, you can consider opting for a debt consolidation loan to pay it off.
Is a credit card interest rate monthly?
Yes, credit card issuers will generally charge interest on a monthly basis. However, you will be charged interest on the unpaid balance daily.
When do credit card charges kick in?
The interest rate for your credit card will be charged on a monthly basis if you only pay the minimum due amount. In case you do not make any payments or only pay a portion of the bill, you will have to pay interest. Additionally, these charges also apply if you withdraw cash from an ATM or purchase any product on EMI.
