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How to Calculate Interest Rate on Credit Card Balances?

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Created on
October 31, 2022


What’s Inside

So, credit cards can be pretty handy, but they do come with a catch: interest.

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.

If you're curious about how they come up with credit card interest rates, here's a guide to help you out.

How is Credit Card Interest Rate Calculated?

  • 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.
  • However, the interest is actually charged every month, using the monthly percentage rate (MPR), which is the APR divided by 12.
  • The interest is calculated based on the number of days you have an outstanding balance on your card, the amount, and the MPR.

The general formula to calculate interest on credit card is:

Interest = (Number of days x Outstanding amount x MPR x 12) / 365

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:

Interest = (30 x 10,000 x 0.03 x 12) / 365 = Rs. 295

You can also estimate the potential interest cost associated with maintaining a balance on your credit card through Fi Credit Card Interest Rate Calculator.  Fi calculator serves as an informative tool to help you make well-informed decisions.

How to Reduce Credit Card Interest Rate Charges?

There are some ways to reduce or avoid paying interest on your credit card balances, such as:

  • Pay your bill in full before the due date to enjoy an interest-free period of up to 50 days.
  • Choose a credit card with a lower APR that suits your needs and budget.
  • Opt for EMI plans for large purchases with lower or zero interest rates.
  • Transfer your balance to another card with a lower or zero interest rate offer for a limited period of time.

Credit Card Interest Rates in India

Following the RBI'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.

Here is a compilation of interest rates or finance fees imposed by central public and private banks for credit card transactions.


Interest Rate/Finance Charges (Per Annum)

Bank of Baroda

13% to 20% p.a - RoI

Bank of Maharashtra

30% p.a - Finance charges

Canara Bank

13% to 14% p.a - RoI

Indian Overseas Bank

30% p.a - RoI

Punjab National Bank

35.89% p.a - Finance Charges

State Bank of India

42% p.a - Finance Charges

Axis Bank

52.85% p.a - Finance Charges

CSB Bank

16% p.a - RoI

Dhanlaxmi Bank

24% to 48% p.a - Finance Charges

Federal Bank

5.88% to 41.88% p.a - APR


43.2% p.a - RoI


44% p.a - RoI


30% to 34.80% p.a - RoI

IDFC First Bank

47.88% p.a - Finance Charges

Induslnd Bank

36% p.a - RoI

Yes Bank

36% p.a - Finance Charges

Kotak Mahindra Bank

42% p.a - RoI

Disclaimer : Rates on credit cards are accurate as of August 17, 2023.


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.

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Frequently Asked Questions

1. What is the monthly interest rate on a credit card?

The monthly interest rate on a credit card in India ranges from 1.2% to 3.99%, depending on the card and the bank

2. What is the interest rate on credit card cash withdrawal?

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.

3. What kind of transactions do you need to pay credit card interest on?

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.

4. How is credit card interest rate calculated?

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.

5. What is the interest rate on credit card cash withdrawal?

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.


Fi Money is not a bank; it offers banking services through licensed partners and investment services through epiFi Wealth Pvt. Ltd. and its partners. This post is for information only and is not professional financial advice.
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