Credit Card Interest Rates

What is a Credit Card Interest Rate?

Credit cards grant you a line of credit against certain charges and fees, finance charges being the foremost among them. Commonly known as credit card interest rates, these charges are imposed as a price of borrowing money from the lender. 

Credit card interest rates are determined by the lender’s policy and thus, vary between lenders. Moreover, credit card interest rates also vary among the different cards issued by the same lender. However, unlike other credit lines, your credit card interest rate is not affected by your CIBIL score. In other words, these predefined standard rates apply to all cardholders regardless of their credit histories. 

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

How to Calculate Credit Card Interest Rate 

Under the circumstances highlighted above, credit card issuers charge interest daily on the due balance in your account. The following formula is used to calculate credit card interest:

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

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

• The net interest payable is 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 21st July and no transactions happen before the next statement date, i.e, August 6th. Interest is charged on ₹10,000 for 21 days (from 1st July to 21st July) and on the remaining ₹5,000 balance for 15 days (from 22nd July to 6th August).

• Interest charged on ₹10,000 for 21 days: [(21 x ₹10,000 x 3% x 12)] ÷ 365 days = ₹207.12. 

• Interest charged on the ₹5,000 balance for the next 15 days: [(15 x ₹5,000 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 28th July and make no subsequent transactions on the card until the next statement date, i.e, 6th August. Interest is charged on the initial sum for 28 days (1st July to 28th July) and on the balance for 9 days (from 28th July to 6th August).

• Interest charged on ₹10,000 for 28 days: [(28 x ₹10,000 x 3% x 12)] ÷ 365 days = ₹276.16.

• Interest charged on the ₹5,000 balance for the next 9 days: [(9 x ₹5,000 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 15th July. Then, 

• Interest charged on the outstanding balance for 15 days:  [(15 x ₹10,000 x 3% x 12)] ÷ 365 days = ₹147.94.

• Interest charged on new outstanding balance with a fresh transaction for 13 days: [(13 x ₹12,000 x 3% x 12)] ÷ 365 days = ₹153.86.

• Interest charged on balance after partial payment for 9 days: [(9 x ₹7,000 x 3% x 12)] ÷ 365 days = ₹62.14.

• Total interest payable: ₹147.94 + ₹153.86 + ₹62.14  = ₹363.94

Credit Card Interest Rate Charged by Some of the 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. 

Cards with Some of the Lowest Interest Rate 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.

DISCLAIMER: 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.