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    Credit Card Interest Rates

    Also termed as finance charges or interest charges, credit card interest rate is the rate charged by credit card issuers on the borrowed amount. However, the interest charges are applicable only to those cardholders who don’t pay their outstanding in full. For instance, if your credit card bill amount for a previous billing cycle is Rs.10,000 and you wish you make a partial payment, either minimum amount due (MAD) or even lesser than that, then the bank will levy finance charges as per its policy.

    The good thing about using credit cards is that if you clear the entire outstanding on the card before the due date, you won’t be charged any interest. But if you’re someone who wishes to clear the dues at your own pace, you must know how much interest your bank charges, how it’s calculated and all other related information.

    How Are Credit Card Interest Rates Calculated?

    Credit card interest rate is calculated as the Annual Percentage Rate (APR) of charge. It is the interest rate for the whole year rather than a monthly rate. However, while calculating interest rate for monthly dues, the monthly percentage rate (MPR) will be applied to the transactions. The APR and MPR vary from one bank to another and one card to another. While applying for a credit card, it’s important to know how much APR is being charged on a particular card.

    Which Credit Card Transactions Attract Finance/Interest Charges?

    As mentioned earlier, if you pay the total amount due (TAD) on your credit card before the due date, the interest charges will not be applied. Let’s see the cases when the finance charges are applicable on credit card transactions.

    1. When you don’t pay the outstanding amount by the due date
    2. When you pay only the minimum amount due
    3. When you pay less than the minimum amount due
    4. When you take a cash advance (cash withdrawal using a credit card)
    5. When you carry forward previous month’s due amount

    Let’s see the consequences of each case in detail.

    • Case: 1 - When you make no credit card payment: When you entirely skip your credit card payment in a month, the bank will start charging interest on the total amount due as well as on all the new transactions from the date of transaction till the time all the previous dues are paid in full.

    The following example will help you understand how the interest is calculated when you don’t pay anything towards the outstanding.

    Transaction Amount (Rs.)
    Purchase made on 10 January, 2018 Rs.5,000
    Total amount due on statement dated 15 January, 2018 Rs.5,000
    Minimum amount due on statement dated 15 January, 2018 (MAD is typically 5% of the TAD) Rs.250
    Payment due date – 3 February 2018  
    Purchase made on 7 February, 2018 Rs.1,000
    Purchase made on 10 February, 2018 Rs.500
    On the next statement dated 15 February, 2018, interest charges will be levied as follows
    Interest on Rs.5000 for 30 days (from 10th January to 10th February)
    Interest on Rs.1,000 for 9 days (from 7th February to 15th February)
    Interest on Rs.500 for 6 days (from 10th February to 15th February)
    • Case: 2 – When you pay only the minimum amount due: If you pay only the minimum amount due on your credit card, interest will be charged on the remaining amount and on all the new transactions till the previous balance is paid in full.
    • Case:3 – When you pay less than MAD: If you wish to pay an amount that is less than your minimum amount due on your credit card, the entire outstanding amount will attract finance charges along with all the new transactions, till the previous outstanding amount is cleared in full.
    • Case: 4 – When you withdraw cash: If you withdraw cash using your credit card, you are availing the cash advance facility, hence, the withdrawn amount will attract finance charges from the date of withdrawal till the amount is paid back in full.
    • Case: 5 – When you carry forward outstanding: If you haven’t cleared your previous month’s outstanding in full, the bank will carry forward the remaining amount to the next billing cycle. In such cases, based on the repayment amount, either MAD or less than MAD, the interest rate will be charged on the outstanding as well as on all the new transactions, till the previous dues are cleared completely.

    Credit Card Interest Rates Charged By Various Banks

    Now that we know about credit card interest rates and how they are calculated, let’s see the interest rates charged by various banks.

    Bank Name Credit Card Interest Rate
    Monthly Percentage Rate (MPR)% Annual Percentage Rate (APR)%
    HDFC Bank 1.99% to 3.49% 23.88% to 41.88%
    ICICI Bank 1.25% to 3.50% 15% to 42%
    SBI Bank Up to 3.35% Up to 40.2%
    Axis Bank 2.50% to 3.25% 34.49% to 46.78%
    HSBC Bank 2.49% to 3.50% 29.88% to 42%
    Amex Bank 1.99% to 3.50% 23.88% to 42%
    Citibank 3.10% to 3.50% 37.20% to 42%
    IndusInd Bank Up to 3.83% Up to 46%
    Kotak Mahindra Bank Up to 3.5% Up to 42%
    RBL Bank Up to 3.5% Up to 42%
    Yes Bank 1.20% to 1.99% 14.40% to 23.88%

    *The credit card interest rates are subject to change and will be revised at the sole discretion of the bank.

    What Is Credit Card Interest-free Period And How’s It Calculated?

    Credit card interest-free period or grace period is the time between the credit card transaction date and the credit card payment due date. It hence varies for every transaction made on your credit card. Typically the interest-free period ranges from 20 to 50 days. If you make the payment within the interest-free period, i.e., on or before the due date, you don’t have to pay any interest. This means you have enjoyed the credit facility at zero interest.

    Let’s see how the credit card grace period is calculated. For instance, a particular credit card has an interest free period of up to 50 days. The billing date on the credit card, for instance, is the 5th of every month. This means the cardholder can spend on this credit card from 6th May to 5th June and he will be billed on the 5th June. His payment due date, considering the 50-day interest-free period, will be 24th June.

    If you calculate from 6th May to 24th June, you will get a period of 50 days, which is nothing but the interest-free period. This means only the transactions done on the first day of the billing cycle, which is 6th May, will have an interest-free period of 50 days. And for all the subsequent transactions, the grace period will get reduced based on the transaction date. This means a transaction done on the 1st of June will have a grace period of only 24 days. Thus the minimum grace period, in this case, is 20 days applicable for a transaction done on 5th June. Thus, grace period or interest-free period varies from one transaction to another.

    The interest-free period is not applicable if the previous month's dues are not cleared and carried forward to the current month. Even for cash advances, there is no interest-free period. Finance charges will be levied on the withdrawn amount from the date of withdrawal till the amount is paid back in full.

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