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Learn how to calculate the interest rate on your credit card balances and find out how much you are paying in interest each month here in this blog.


How to Calculate Interest Rate on Credit Card Balances?

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"How to Calculate Interest Rate on Credit Card Balances?"

Anoop Menon

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<p>
    So, credit cards can be pretty handy, but they do come with a catch: interest.
   </p><p>
    Interest is what the credit card company charges you for borrowing money with your card. If you pay off your bill in full each month, you won't have to pay interest. But if you keep a balance on your card, then you'll have to pay interest on whatever you owe.
   </p><p>
    If you're curious about how they come up with credit card interest rates, here's a guide to help you out.
   </p><h2>
    How is Credit Card Interest Rate Calculated?
   </h2><ul role="list">
    <li>
     The interest rate on credit cards is usually expressed as an annual percentage rate (APR), which is the credit card interest rate calculated for the whole year.
    </li>
    <li>
     However, the interest is actually charged every month, using the monthly percentage rate (MPR), which is the APR divided by 12.
    </li>
    <li>
     The interest is calculated based on the number of days you have an outstanding balance on your card, the amount, and the MPR.
    </li>
   </ul><p>
    The general formula to calculate interest on credit card is:
   </p>

<p>For example, if you have an outstanding balance of Rs. 10,000 on your card, with an APR of 36%, and you pay it after 30 days, the interest will be:</p><p><strong>Interest = (30 x 10,000 x 0.03 x 12) / 365 = Rs. 295&nbsp;</strong></p><p>You can also estimate the potential interest cost associated with maintaining a balance on your credit card through Fi's <a target="_blank" rel="noopener noreferrer" href="https://fi.money/calculators/credit-card-interest-rate-calculator">Credit Card Interest Rate Calculator. </a>Fi calculator serves as an informative tool to help you make well-informed decisions.</p><h2>How to Reduce Credit Card Interest Rate Charges?</h2><p>There are some ways to reduce or avoid paying interest on your credit card balances, such as:</p><ul role="list"><li>Pay your bill in full before the due date to enjoy an interest-free period of up to 50 days.</li><li>Choose a credit card with a lower APR that suits your needs and budget.</li><li>Opt for EMI plans for large purchases with lower or zero interest rates.</li><li>Transfer your balance to another card with a lower or zero interest rate offer for a limited period of time.</li></ul><h2>Credit Card Interest Rates in India</h2><p>Following the government's consumer-friendly move to maintain the current 6.50% rate amid rising retail inflation, many banks have kept credit card finance charges or interest rates on hold.</p><p>Here is a compilation of interest rates or finance fees imposed by central public and private banks for credit card transactions.</p>

<p>Disclaimer : Rates on credit cards are accurate as of August 17, 2023.</p><h2>Conclusion</h2><p>Credit cards can be useful, but they often charge interest on outstanding balances. The interest rate is determined by the APR, the outstanding balance, and the number of days with a balance. To avoid paying interest, you can choose to pay the full balance every month, select a card with a lower APR, opt for EMI plans, or transfer your balance to a card with a lower or zero interest rate.</p><h2>Get up to 5x Rewards With This Credit Card</h2><p>If you're looking for a credit card that gives you the best bang for your buck, try the <a target="_blank" rel="noopener noreferrer" href="https://fi.money/apply-credit-card-online">Fi-Federal co-branded Credit Card </a>. This might just be what you need. With this card, you're assured of a 2% valueback through rewards. But that's not all, as you'll also get 5x on your top 3 brands, 2x on all partner brands, and 1x on everything else, including rent and fuel. What's unique about Fi Money is that you earn points in the form of Fi-Coins, our very own reward system. For travellers, the perks are even better as you can convert your Fi-Coins to airline miles or cashback.</p><p>But that's just the tip of the iceberg, as you'll also enjoy airport lounge access, 1% forex, the freedom to choose your own billing cycle, and personalised reminders. With consolidated spend insights, you can easily track your spending and make informed financial decisions.</p><h2>Frequently Asked Questions</h2><h3>1. What is the monthly interest rate on a credit card?</h3><p>The monthly interest rate on a credit card in India ranges from 1.2% to 3.99%, depending on the card and the bank</p><h3>2. What is the interest rate on credit card cash withdrawal?</h3><p>Cash withdrawal interest rates on credit cards are the same as finance charges on outstanding amounts, ranging from 2% to 4% per month, depending on the card applied for.</p><h3>3. What kind of transactions do you need to pay credit card interest on?</h3><p>Credit card interest is charged on unpaid balances and cash withdrawals. Pay your bill in full and on time, and avoid cash advances to save interest.</p><h3>4. How is credit card interest rate calculated?</h3><p>Credit card interest rate is the APR you pay for borrowing money from your issuer. It's calculated based on the method used by your issuer, such as the average daily balance, which uses your daily balance during the billing cycle.</p><h3>5. What is the interest rate on credit card cash withdrawal?</h3><p>The interest rate for credit card cash withdrawals is the fee charged by your credit card issuer for borrowing cash. This fee is typically high and can reach 3.5% per month.</p>