A Credit Card is a financial facility that banks offer. The card has a particular credit limit and lets you buy things now and pay for them later. Today, these cards have become a crucial part of our lives. They let you conveniently pay for purchases online and offline. Using them responsibly enables you to build a positive credit history. Such a card can also offer financial backup during emergencies.

While you can use your Credit Card to pay for purchases up to the credit limit fixed for your card, you need to repay the amount to your Credit Card issuer on or before the due date.

When you fail to repay the Credit Card bill fully, you need to pay interest on the remaining amount based on the Credit Card interest rates. Hence, it is necessary to be aware of these rates. Here are the answers to the most commonly asked questions about Credit Card interest rates.

What is the Credit Card interest rate?

Credit Card interest rate is a financial charge. It is the rate that card issuers charge on the amount you borrow. Simply put, the interest on your Credit Card is the cost you pay for borrowing money using this card. However, the interest is only applicable in some instances, and the rates also vary between banks.

interest rates also depend on the type of credit card you choose. When the interest rate is given annually instead of monthly, it is called the Credit Card Annual Percentage Rate.

When are Credit Card interest rates applicable?

The interest is charged on your Credit Card transactions only in certain instances. A few of these include the following:

• When you do not pay your outstanding dues by the last day of bill payment.
• When you use your Credit Card to withdraw funds from an ATM.
• When you pay only the minimum amount due or less than the minimum amount due for that month.

How does interest on Credit Cards work?

When you do not pay the total amount due on or within the due date of your Credit Card bill, you carry a balance on your card. This remaining balance accrues interest. This interest is charged according to the applicable APR and the average daily balance. Consequently, this interest is added to your outstanding balance. Interest is charged to your Credit Card daily as long as you do not pay the outstanding balance entirely.

Hence, you need not worry about financial charges when you pay your Credit Card bill completely and on time. Instead, you can enjoy the interest-free period on your Credit Card.

Conclusion

Now that you know about Credit Card interest rates and how they work, use your card carefully and pay your bill in full and on time to avoid paying interest.