Credit Card Interest Rate

Credit Card interest rates vary from one card issuer to another, the interest is applicable on a cardholder in two cases. The first case is where the cardholder pays the minimum amount due on his/her card and the second one is where the cardholder makes the payment but that is less than the total amount due on the card. 

Annual charges and service charges are also implemented on the cardholders by some of the card issuers. To avoid such charges it becomes important to choose your credit card provider wisely and opt for such a card on which these charges are not applicable.

Interest rate is yet another thing which you should be aware of before getting a credit card. The interest rate charged on a credit card is the same for all the cardholders which is irrespective of their eligibility or profile unlike the loans offered by the banks and NBFCs. 

What is the Credit Card Interest-free Period?

  • A credit card interest -free period means you get a zero-interest time on your credit card use.
  • If the payment is made within the interest-free period there is no interest charged on your transaction/uses. 
  • Credit card interest-free period is also known as the grace period, basically, it is the time period from the credit card transaction date and the credit card payment due date. 
  • Thus, the credit card interest period differs on your every transaction made through your credit card. 
  • Generally, an interest-free period varies from 20 to 45 days depending on the card issuer. 

How is Credit Card Grace Period Calculated?

Let’s understand this with an example.

Suppose you have a credit card whose interest-free period is for 45 days. The billing date for your card on is on 10th of every month. This means the cardholder can spend from 11th June to 10th July. The bill will come on the 10th of July. 

And as 45 days is the interest-free period, hence from the day of use to the 50th day, no interest will be calculated on that transaction.

Important Points to Know about Credit Card Interest Rate

  • Interest is charged on credit cards only when you don’t pay the full outstanding amount, which means interest will not be charged when you make the full payment and there is no outstanding amount on your card. 
  • Interest is also charged when you withdraw cash from ATMs through your credit card.
  • No interest is charged when you clear your credit card’s outstanding amount on time.
  • You will not be charged any interest on using your credit card if you have started your billing cycle with a zero balance or you pay your last statement balance in full. 
  • Interest is also not charged on balances with a 0% promotional APR.
  • Banks and NBFCs calculate interest rates on credit cards as an annual percentage rate (APR), this is the interest rate charged on the balance for one year. 
  • Different lenders charge different APRs and MPRs. 
  • A monthly percentage rate (MPR) is levied every month on the outstanding amount which depends on the lender.
  • APRs and MPRs also vary within the same lender depending upon the type of credit card. 
  • Even a single lender offers different types of credit card, the difference exists based on offers, benefits, and charges applicable and so on. 

For example, HDFC offers- Platinum Times Card, Titanium Times Card, Jetprivilege HDFC Bank World Card, Regalia Card.

Keep the above mentioned points in mind when you are looking for a credit card. Research well before you opt for one. Credit cards come with high interest rate and a wrong decision can cost you more.