What is credit card interest rate
Credit card interest rates are the charges charged by credit card issuers on the borrowed amount applicable only when cardholders fail to pay their outstanding bill in full each month.
Credit card bills are generated at the end of each billing cycle, and the credit card user has to pay the outstanding amount before the payment due date and grace period combined. Managing your credit card effectively can help you track your spendings and avoid unnecessary interests and charges.
If a cardholder fails to pay the outstanding amount in time, then interest is charged on the utilised credit limit for the billing cycle. The period of interest calculation is charged from the day of default up to the payment date.
Here’s an example to understand this better – If the credit card billing cycle ends on the 20th of every month and comes with a grace period of 14 days, the last day for bill payment is the 5th of the next month.
Assume that there are two transactions, on the 5th and 9th of a month. If bill payment is made on the 10th, the purchase made on 5th January will attract interest for five days in case of default. For transactions made on 9th January, interest calculation is only for one day.
Formula to calculate the interest on credit card
Using a credit card can be a quick solution to your financial needs, but the interest charged on the balance can increase if not paid on time. Here's the formula to calculate interest on credit card:
1. Monthly interest rate = Annual interest rate ÷ 12
2. Daily interest rate = Monthly interest rate ÷ 30 or 31 (depending on the number of days in the month)
3. Interest charge = Daily interest rate × average daily balance × number of days in the billing cycle
The average daily balance obtained by adding up the daily balances and dividing it by the number of days in the billing cycle. It's important to understand how interest is calculated on your credit card to avoid penalties and increase your credit score.
How are credit card interest rates calculated
Credit cards can be a useful financial tool, but the interest rates can be tricky to calculate. Here's how credit card interest rates are calculated:
- Your credit card provider will set a standard Annual Percentage Rate (APR) for purchases and cash advances.
- Interest is calculated on a daily basis, using your average daily balance.
- If you carry a balance, interest charges will be added to your account monthly. You will be charged interest on any unpaid balance and any new purchases.
- If you pay the entire balance off every month, interest may not be charged at all.
- Late payments or missed payments may increase your interest rate, as well as incurring late fees.
Bajaj Finserv provides low-interest rate credit cards at 3.99% per month (47.88% per annum).
Credit card interest rates are only applicable if the cardholder fails to pay the minimum amount due within the grace period. The minimum amount may also contain the interest component. Hence, paying the total amount due helps cardholders avoid paying any additional interest.
Credit card interest rates on top credit cards in India
Here’s a quick look at the late payment fees on Bajaj Finserv co-branded credit cards.
Credit cards |
Interest rate |
Bajaj Finserv RBL Bank Binge SuperCard |
12.5% on outstanding amount |
Bajaj Finserv RBL Bank Binge SuperCard First-year Free |
12.5% on outstanding amount |
Bajaj Finserv RBL Bank Platinum Choice SuperCard |
12.5% on outstanding amount |
Bajaj Finserv RBL Bank Platinum Choice SuperCard First-year Free |
12.5% on outstanding amount |
Bajaj Finserv RBL Bank Platinum Plus SuperCard |
12.5% on outstanding amount |
Bajaj Finserv RBL Bank Platinum Plus SuperCard First-year Free |
12.5% on outstanding amount |
When is the interest charged on credit cards
Credit cards offer convenience and flexibility, but if not used responsibly, they can incur high interest charges. Here's when interest is charged on credit cards:
If you carry a balance: The credit card issuer charges interest on existing balances that are not paid in full by the due date.
If you withdraw cash: Credit card issuers charge a higher interest rate on cash withdrawals than on purchases.
If you miss a payment: Late payments can increase your interest rate, resulting in higher interest charges.
If you exceed your credit limit: Going over your credit limit can result in an over-limit fee and increase your interest rate.
If you have a promotional offer: You may have to pay interest on purchases made during the promotional period if you don't pay the balance by the end of the promotional period.
To avoid paying high-interest charges, it's important to pay your balance in full and on time every month. Keep track of your credit limit, promotional offers, and interest rate changes to maintain good credit hygiene and avoid unnecessary debt.
| Transaction Date | August 1st 2023 |
| Amount | Rs. 20,000 |
| Statement Date | July 6th 2023 |
| Minimum Amount Due (5%) | Rs. 500 |
| Due Date | July 26th 2023 |
| Monthly Interest | 3.00% |
Credit cards with no annual fee
The annual fee is a charge required to renew a credit card. Bajaj Finserv provides credit cards with no annual fee.
Apply for a Bajaj Finserv RBL Bank Credit Card today and get low-interest rates credit card offers.
Frequently asked questions
Credit card interest rate is the fee charged on the outstanding balance by the card issuer when you do not pay your credit card bills on or before the due date. This rate varies from one card to another and is also dependent on your credit history. The Bajaj Finserv RBL Bank co-brand credit card offers the lowest interest rate at 3.99% per month.
You can avoid paying the credit card EMI interest rate by clearing both the minimum amount due and the total amount due on or before the due date. Interest is charged on the outstanding amount every billing month. Therefore, you do not need to pay the credit card interest rate when you pay your balance in full and on time.
The credit card interest rate gets charged on the outstanding balance when you fail to repay the total amount due before the due date. It can be charged daily or monthly, depending on the card type. Some credit cards also account for the Annual Percentage Rate (APR), calculated yearly.
Credit card interest rates can be charged both monthly and annually, depending on the card issuer.
Premium credit cards in India have the highest interest rates. They come with a high joining and annual fee and offer exclusive perks and benefits. The credit card interest rates of these cards depend on the issuing banks.
Several credit cards fall in the lowest interest rate credit cards category. Bajaj Finserv RBL Bank SuperCard also has low-interest rates of 3.99% per month.
The interest-free period starts on the first day of the billing cycle, also known as the statement period, and ends 20 to 25 days after the last day of the billing cycle.
When you pay a minimum amount due, you will have to pay interest against your total outstanding balance.
Yes, 12% interest is high. Bajaj Finserv co-branded credit cards charge lower interest rates on credit cards.
The rate of interest for credit cards can vary, and it may change periodically based on market conditions, your creditworthiness, or the terms and conditions of your credit card agreement.
No, not all credit cards from the same bank have the same interest rate. The interest rate on a credit card can differ depending on the specific card's features, such as rewards, benefits, or credit limits.
Not all credit cards offer an interest-free period. Interest-free periods are usually a feature of traditional credit cards, but some specialized cards like charge cards or secured credit cards may not provide this benefit.
The interest rate on a credit card after the due date is typically higher than the standard rate specified in your card agreement. It is often referred to as the "penalty" or "late payment" interest rate and can be significantly higher than the standard rate.
Yes, interest is usually charged on cash withdrawals made with a credit card, and it typically starts accruing immediately. This is in contrast to purchases, which often have an interest-free period if the balance is paid in full by the due date.
If you only make the minimum payment on your credit card balance, you will likely be charged interest on the remaining balance. Credit card companies encourage paying more than the minimum to reduce interest charges and pay down the debt faster.
Credit card interest rates tend to be high because credit cards are unsecured loans, meaning there is no collateral. Lenders charge higher rates to compensate for the greater risk. Additionally, credit cards offer convenience, revolving credit, and various benefits, all of which contribute to the higher cost of borrowing compared to other forms of credit.
No, the interest rates on credit cards vary from lender to lender. Some credit cards may have higher interest rates of up to 30% or more.
The monthly interest rate on a credit card is calculated by dividing the annual interest rate by 12. For instance, if the annual interest rate is 24%, the monthly interest rate would be 2%.
The best way to avoid credit card interest is to pay your balance in full by the due date. If you cannot pay your balance in full, try to pay more than the minimum payment due to reduce your interest charges. Avoid cash advances, late payments, and exceeding your credit limit to avoid additional interest charges and fees.
The interest on a credit card is calculated using your average daily balance and the monthly interest rate. You can use an online calculator or manually calculate the interest charges by multiplying your average daily balance by the monthly interest rate and the days in the billing cycle. It is important to understand how interest is calculated on your credit card to manage your finances efficiently.
The current interest rate on credit cards varies depending on the credit card issuer, your creditworthiness, and other factors. Typically, the interest rate can range from 15-25% or more.
Several credit cards offer low-interest rates, especially for individuals with good credit scores. It is important to check the terms and conditions of each card to ensure they suit your needs and financial goals. Remember, low-interest rates do not always equate to the best credit card for your situation.
