As a Credit Card owner, you must have found yourself paying the minimum balance on your Credit Card at least once. In such a scenario, you would notice that there is a certain interest amount that has been charged. What is this interest and how does one calculate Credit Card interest? We help you understand how to calculate Credit Card interest rates.
What is a Credit Card interest rate?
Credit Card interest rate is the rate charged by the bank or financial institution issuing your Credit Card, on the balance amount (or credit spent) on your Credit Card. This is valid only when you choose to pay part of the amount or minimum due amount or lesser, and do not pay the monthly pending balance amount in full. If you clear the outstanding amount before the due date, there is no interest charged by the Credit Card company. It is essential to make yourself aware of the interest rate on your Credit Card before you choose one. Depending on your credit score, you may be offered a lower interest rate as well.
How do you calculate interest rate on a Credit Card?
Your Credit Card spends are subject to a standard rate of interest known as the Annual Percentage Rate, or APR. Although the APR is termed as the interest rate for the whole year, your monthly billing showcases the MPR which is the Monthly Percentage Rate that is applied in your transactions. These numbers are different for different Credit Cards, so you may need to check the APR being charged on your Credit Card.
When do you pay interest on Credit Card?
As earlier mentioned, the interest is applicable only when you have not paid the entire amount in full. Partial payments, minimum amount due payment or lesser than minimum amount payment is when the interest rate is paid by you. Most Credit Card companies usually offer a grace period for payment of the full amount. If you do not make the full payment within this grace period, the interest rates are applied. Do note that the interest rate applied on the monthly due amount is the MPR and not the APR.
A Credit Card is a handy tool that offers you credit for your various purchasing needs, at the same time offering offers, rewards and benefits. It can be a saving grace in case of emergencies as well. Depending on your credit score and payment history, the interest rate offered by the Credit Card company can be low.
To know more about the various types of HDFC Bank Credit Cards and different rates of interest, click here.
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