Credit Card Interest Rates

Credit card helps you spend more and earn more.  It save you from the worry of paying immediate cash and help you during emergency cash requirement. Along with reward points it comes with various cash back offers as well.

Credit card interest rate varies from one lender to the other. It basically depends on the type of credit card you opt for according to your need (shopping card, travel card etc.) and your salary that decides your repayment capacity. The credit card interest rate calculator can help you calculate the interest rate that would be provided on your credit score depending on your monthly income, ongoing loans and credit score.

Factors affecting credit card interest rate
Your credit score defines the interest rate your credit card would bear. Below are the factors responsible for deciding the credit card interest rate-

Payment history
It provides the assurance of repayment of money lent to you. The lender can see if you have paid your bills timely. In case you are found at fault, your credit score will fall accordingly and you would be required to pay a higher interest rate.

Amount owed
It states the amount of credit you owe. The calculation is done on the basis of your total available credit that has been used. Less is better, but owing nothing is not good. This way the lender can track your repayment habit i.e. if you borrow money, you are responsible and financially stable enough to pay it back.

Your credit used on specific types of accounts, such as a mortgage, auto loans, credit cards and instalment accounts is also taken into consideration. And, if you have a mix of different types of credit and that you manage them all responsibly then you can get the benefit of lower credit score.

Length of Credit History
Your credit score is also influenced by the age of your credit history i.e. how long you have been using credit. A lender would check on the dates to see for how many years you have been using credit. How old is your oldest account, and what is the average age of all your accounts?

If you have been able to maintain a good CIBIL record which is not marred with late payments and other negative items then your long history can help you fetch lower interest rates. In case you are a beginner, a short history can be also be fine as long as you've made your payments timely and not loaded with much delayed repayments.

New Credit
CIBIL also rates you on the number of accounts you have applied or new credit purchases you have made in a given time period. The increased number of credit purchases done together can hit your credit score making everyone suspicious about your repayment capability. It involves greater credit risk as people tend to open new accounts when they are experiencing cash flow problems or planning to take on lots of new debt.

For instance, if in case you have an on-going car loan and you have applied for a home loan, the lender will look at your total existing monthly debt obligations as part of determining how much home loan EMI you can afford to pay monthly. And if you have recently applied for several new credit cards, the lender will get an image that you are planning to make a huge number of purchases on credit card in the near future, and you might be incapable of repaying your home loan EMIs. Lenders being sceptical about your repayment capability would offer you higher interest on loan or new credit card being purchased.

Types of Credit in use
The mix of credit is always better than having a single type of credit. The mix can include credit cards, store accounts, instalment loans and mortgages. It also looks at how many total accounts you have.

Low Interest Rate Credit Cards in India
An interest rate ranging from 1.5% to 2.99% is considered low for credit cards in India. The table given below shows low interest rate credit cards offered by popular banks in India-

Bank Credit Card Interest Rate p.m.
SBI SBI Advantage Platinum Credit Card 1.99%
ICICI ICICI Bank Instant Platinum Credit Card 2.49%
HDFC HDFC Infinia Credit Card 1.99%
Citibank Jet Airways Citibank Titanium Credit Card 2.50%
Kotak Kotak Velocity Platinum Credit Card 3.10%
ICICI ICICI Bank Instant Gold Credit Card 2.49%
SBI SBI Advantage Gold & More Credit Card 1.99%
Citibank Citibank Rewards Credit Card 3.15%

How is Interest on Credit Card calculated?
Most of the credit card users just read the statement they receive every month and make the payment. But it is very important to know how that amount is calculated. Let us try to understand it with an example-
Here we assume that the person has no outstanding balance on his credit card, the statement date is 18th of every month and interest rate is 2.5% per month.

Date Transaction Amount
10th July Purchased Jewellery 15000
15th July Purchased Clothes 5000
18th July Statement Date*  
15th August Payment to Credit Card 2000
16th August Groceries Purchase 1000
17th August Payment to Credit Card 15000

Since the payment was made after the due date, the entire outstanding balance will attract interest charge.

  • Interest on Rs 15,000 @ 2.5 per cent p.m. from 18 July to 15 August (i.e. for 28 days)

[(15000 x 2.5 x 12 x 28)/365]/100 = Rs 345.20

  • Interest on Rs 13,000 @ 2.5 per cent p.m. from 15 August to 17 August (i.e. for 3 days)

[(13000 x 2.5 x 12 x 3)/365]/100= Rs 32.05

  • Interest on Rs 5,000 @ 2.5 per cent p.m. from 18 July to 17 August (i.e. for 30 days)

[(5000 x 2.5 x 12 x 30)/365]/100 = Rs 123.28

  • Interest on Rs 3,000 @ 2.5 per cent p.m. from 17 August to 18 August (i.e. for 2 days)

[(3000 x 2.5 x 12 x 2)/365]/100 = Rs 4.93

  • Interest on Rs 1000 (fresh spends @ 2.5 per cent pm from 16 August to 18 August (i.e. for 3 days)

[(1000 x 2.5 x 12 x 3)/365]/100 = Rs 2.46
Total Interest= 345.20 + 32.05 + 123.28 + 4.93 + 2.46= Rs 507.92

Hence the total amount due will be-
Rs 4000 (Rs 3000 from previous period and Rs 1000 fresh spends) + Rs 507.92 (Interest) + Rs 350 (Late Payment Fee) = Rs 4857.92

How to use Credit Card EMI Calculator?
From the above example, you can see that there are a number of factors that affect your credit card bill. It is very difficult calculate this amount manually. To make it easier for the customers, a number of banks provide the Credit Card EMI Calculator tool on their website. You have to fill in the information in the boxes and it will show your bill amount for the month.

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