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Credit Cards and Interest Rates

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What are credit card interest charges?

 

Interest charges on credit cards are the cost charged by credit card issuers for borrowing money. It is generally stated as an annual percentage rate (APR) – which is usually variable – meaning they can alter depending on a benchmark like the prime rate. For instance, if your credit card charges a prime rate plus 10% and the prime rate is 2%, your APR would be 12%.

 

However, only if you don’t pay off your credit card balance in full each month will interest be charged. The card provider will add credit card interest charges to your outstanding balance in such a situation. If you keep carrying a balance and don’t pay it off fully the next month, you’ll have to keep paying interest on top of interest. Credit card balances may increase quickly as a result, and become challenging to control.

 

Different types of interest rates for credit cards

 

It’s important to carefully review the terms and conditions of a card, including the type of credit card interest rates offered, to understand how it may impact your finances and repayment strategy. There are three categories of credit card interest rates: variable, fixed, and promotional. Below is the detailed explanation of all three:

 

Fixed Rates

 

Fixed interest rates, as the name suggests, remain the same for a specific period. They do not change with fluctuations in external benchmarks. Your credit card issuer sets a fixed rate at the time of issuing the card, and it remains consistent until the issuer decides to change it. However, fixed rates can still change if you miss payments or violate the terms of your credit card agreement.

 

Variable Rates

 

Variable interest rates are typically tied to an external benchmark, such as the prime rate. If the benchmark rate goes up or down, your credit card’s interest charge may also change accordingly. This means that variable credit card interest rates can fluctuate over the course of your credit card usage.

 

Promotional Rates

 

Promotional interest rates are special offers provided by credit card issuers for a limited time. These rates are often lower than the standard rates and may apply to specific transactions, such as balance transfers or new purchases. Promotional rates can help you save on interest charges, but they usually have an expiration date. After the promotional period ends, the standard credit card interest charge will apply.

 

How is an interest charge on credit card calculated?

 

The Annual Percentage Rate (APR), which indicates the interest rate for the whole year, is used to calculate credit card interest rate in india. However, the Monthly Percentage Rate (MPR) is used to calculate interest on monthly balances. Between banks and credit cards, the APR and MPR can differ, therefore when applying for a credit card, it is important to be aware of the APR.

The formula to calculate credit card charges in india is:

 

Credit Card Interest = [(Number of days from the transaction date x Outstanding amount x Monthly credit card interest rate x 12)] ÷ 365 Days

 

Credit card interest – free period

 

The time frame in which you can use your credit card to make purchases without being charged interest is known as the credit card interest-free period. In other words, there won’t be any interest added to your purchases during this time.

 

The interest-free period on credit cards generally starts on the statement date of the billing cycle and ends on the cycle’s payment due date.

 

However, it’s also important to know that this interest-free period is only valid if you pay off your entire balance. If you carry a balance from one month to another or pay only a part of the outstanding amount, you will be charged interest on the outstanding portion.

 

What is a good interest rate for a credit card?

 

A good interest rate for a credit card can vary depending on several factors, primarily your credit score. Generally, the higher your credit score, the lower the credit card interest charge you can expect to receive. Credit card companies view individuals with higher credit scores as less risky borrowers, so they offer them more favorable rates.

 

To determine what credit card interest charges you might be eligible for, it’s important to know your credit score and the corresponding credit rating category it falls into, such as excellent, good, fair, or poor. By understanding your credit rating, you can get an idea of the range of interest rates available to you before applying for a credit card.

 

Credit card interest rates by top banks

 

Here is a tabular representation of the different credit card interest rate offered by the top banks in India:

 

Bank NameMonthly Interest RateAnnual Percentage Rate (APR)
HDFC Bank3.40 %40.80 %
SBI BankUp to 3.50 %Up to 42 %
Axis BankUp to 3.60 %Up to 52.86 %
IndusInd BankUp to 3.95 %Up to 47.40 %
Kotak Mahindra BankUp to 3.50 %Up to 42 %
Yes BankUp to 2.4 %Up to 28.8 %

Maximizing savings: Comparing credit card interest charges and utilizing BharatNXT for payments

 

Credit card interest charges can vary widely among different card issuers and even within the same issuer’s product offerings. Therefore, it’s always recommended to shop around and compare various credit cards to find the best credit card interest charge and terms that suit your financial needs and credit profile.

 

Furthermore, you can use the BharatNXT app to pay off your interest charge on credit card, while taking advantage of various benefits. The platform allows you to use your credit card to make quick and easy payments for a variety of expenses such as rent, salary, taxes, and other utility bills. Also using BharatNXT app on a regular basis increases your credit limit and credit score. So, get the app now!

 

Note: The interest rates and card charges mentioned above are subject to change at the credit card company’s sole discretion.

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