How is the interest rate calculated on a credit card?
Credit card interest rates are the charges charged by credit card issuers on the borrowed amount. However, interest charges are 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.
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.
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.
How are interest rates calculated?
Credit Card interest rates are calculated based on the monthly percentage rate (MPR) and the annual percentage rate (APR). APR is the interest rate for the whole year. MPR is the rate that is applied while calculating interest rates for monthly dues.
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 SuperCard 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.