Interest rates on credit cards can vary from one card issuer to another so it’s important to shop around before you make your decision. Interest will apply to a cardholder if the cardholder pays the minimum amount due on his/her card or makes a payment 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. These charges are automatically deducted from the principal amount of the account and are paid in full at the beginning of each month. The amount charged is based on a predetermined rate that varies from one company to another.
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.
What do you understand by Credit Card Interest-free Period?
When you use a credit card, you want to make sure that your payments are made on time. The interest-free period is a way for you to make sure that happens.
The 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.
The 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 rate period differs on every transaction made through your credit card. Generally, an interest-free period varies from 20 to 45 days depending on the card issuer.
How do you calculate your Credit Card Grace Period?
Let’s say you have a credit card that gives you 45 days of interest-free use. The billing date for your card is on the 10th of every month, so you can start using it on the 11th of June and end up using it on the 10th of July. On that day, your bill will come, and it won’t be charged interest.
Important Points to keep in mind about Credit Card Interest Rate
- Interest is charged on your credit card when you make a purchase or use a cash advance from your account and the transaction results in an outstanding amount.
- Interest will also be charged if you withdraw cash from an ATM through your credit card.
- If there is no outstanding amount on your card, no interest will be charged.
- No interest will be charged when you clear your balance on time.
- Interest is also not charged on balances with a 0% promotional APR.
- If you have started your billing cycle with a zero balance, or if you pay your last statement balance in full, you will not be charged any interest.
- Banks and NBFCs calculate credit card interest rates as an annual percentage rate (APR), which is the interest rate charged on the balance for one year.
- Different lenders charge different APRs and MPRs.
- The APR and MPR are the two most important components of a credit card’s interest rate.
- The APRs vary within the same lender depending upon the type of credit card, while the MPRs are levied every month on the outstanding amount.
