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How Credit Card Interest Rate is Calculated after Due Date?

A credit card is considered a viable financing option to overcome a financial crunch. Generally, banks offer a credit limit on a card per the customer’s financial profile. And after that, it is up to the user to utilise their credit card limit wisely. So do get clarity on charges before the credit card application. You may come across the term interest-free period during the card application. Well, it is a benefit of credit cards that makes credit card purchases beneficial for customers. 

Understand the Credit Card Interest Rate Working System

Credit card interest rates incur due to late payments; this can put you under a financial burden. Such interest is calculated on a daily basis and compounds daily. So making timely bill payments is necessary for customers.

The interest on credit cards is calculated on the outstanding dues. While making credit card bill payments, there can be the following scenarios. 

Scenario 1: Full Payment Within the Interest-free Period 

After receiving the credit card payment online bill statement, the customer has a credit-free period of 20-50 days to pay the bill. The interest-free period depends on the card provider’s terms and conditions.

An individual should pay the bill before the last date of their due date. And ensure the payment is made before the end of the credit card interest-free period. Because making bill payments within the interest-free period helps you avoid interest charges.

Scenario 2: Partial Payment within the Interest-free Period

Credit cards are offered with a revolving credit facility that allows cardholders to pay the outstanding bill amount and the interest at a later date.  

Cardholders can choose to pay only the minimum due amount mentioned in the billing statement and the outstanding amount later over a period. But interest will be levied at a certain percentage on the outstanding amount until the customer pays the entire bill amount. So you need to pay additional charges, but the facility keeps you in good standing. 

Scenario 3: Bill Payment After Due Date

As mentioned, the interest on credit card outstanding amounts is charged on a daily basis and compounds daily; it becomes too costly with the unpaid bill amount. So do pay the bill after the first late payment; otherwise, the interest will increase.

Interest Rate Calculation Formula After Due Date

(Number of days from the purchase on credit card x the purchase amount x Monthly interest rate x 12 months)/365 days.


Suppose the credit card bill for a month is Rs. 20,000. 

  • If the customer pays the bill amount in full and before the due date, there will be no interest charge
  • The cardholder makes a partial payment of Rs. 12,000 before the due date. In this case, the interest will be calculated on the entire amount of Rs 20,000 till the first payment. Interest on the balance – Rs. 8,000 – will be calculated till the next credit card bill statement is generated.
  • If the entire amount is outstanding even after the due date, the interest charge will be started right from the purchase date and added to the next bill payment statement as dues with late fees. It will also attract interest. 

How to Pay Off Credit Card Bills Fast

The following are the ways that can help individuals pay off their credit card bills fast:

  • Convert payment to EMIs

Credit card outstanding amounts can be converted into EMIs (Equated Monthly Instalments) for easy payments. Depending on the card provider, it can be a facility for free or may incur a small fee. So do look at the processing fee before opting for this option.

  • Pay more than the minimum bill limit

Individuals can pay the minimum credit card bill if they can not pay the entire amount of the bill. But it attracts interest. So try to pay as much as possible to reduce the amount payable in the next bill statement. 

Also Read: Tips to Use Credit Cards for Balance Transfers

The Closing

Thus, credit card holders should avoid carrying bill balances and waiting until the due dates to pay off credit card bills. An outstanding credit card balance means accumulating interest every day. If it is hard to pay off the full balance, try to pay as much as possible before the due date. Paying only the minimum bill amount can keep customers in debt for a long time and be devoid of credit card benefits, like a grace period to pay the bill. Therefore, pay as often as possible. 

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