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2 mins Read | 4 Years Ago

Credit Card Interest Rates: What is it & How it Works

What is Credit Card Interest Rates in India | ICICI Bank


A lot of credit card users do not understand about the interest rates. While it may seem to be a complicated thing to deal, it is not as difficult thing to understand as you would think it is. Read on to understand everything you want to know about credit card interest rates.

What is Credit Card Interest Rate

Credit card interest rate, which is also known as the finance charge is the rate charged by the credit card companies on the amount you borrow. The interest rate varies from lender to lender and based on the type of credit card you own. Let us understand more about the credit card interest.

Credit Card Interest Rates 2024

The Interest on your Credit Card is a percentage of the balance amount charged when you fail to make the full payment within the due date. This interest applies when you pay only the minimum balance or miss your full monthly payment. If you settle your Credit Card outstanding in full before the due date, interest will not be levied on the Account. It is of utmost importance to be aware of Credit Card Terms & Conditions and Interest Rates.

Card Type

Monthly Interest Rate

Annual Interest Rate

ICICI Bank Instant Platinum Credit Card



ICICI Bank Coral Credit Card



ICICI Bank Rubyx Credit Card



ICICI Bank Sapphiro Credit Card



MakeMyTrip ICICI Bank Platinum Credit Card



MakeMyTrip ICICI Bank Signature Credit Card



ICICI Bank Manchester United Platinum Credit Card



ICICI Bank Manchester United Signature Credit Card



ICICI Bank HPCL Coral Credit Card



ICICI Bank HPCL Super Saver Credit Card



ICICI Bank Expressions Credit Card



For e.g., you have an ICICI Bank Instant Platinum Credit Card with a billing cycle of 30 days. On May 1, 2024, you make a purchase of Rs 5,000 but you don't pay the entire balance by the due date. Your Credit Card charges will be as below:



Purchase Amount

Rs 5,000

Monthly Interest Rate


Daily Interest Rate


Billing Cycle Days

30 days

Average Daily Balance

Rs 5,000

Interest Charged

Rs 124.5

How to Lower My Credit Card Interest Rate?

Reducing your Credit Card Interest Rate can be tricky, especially if it is your first Credit Card or you have a low credit profile. To begin with, first research other Credit Card offers to use them as a basis for negotiation with your existing Credit Card provider. Raise your creditworthiness by improving your payment record, allowing you access to lower rates. You can also consider a balance transfer to a Card, whose primary interest is not so high.

How Is Credit Card Interest Rate Calculated?

The credit card interest rate in India is calculated as per the APR – Annual Percentage Rate. It is the interest rate calculated for the whole year rather than the monthly rate. However, while determining the interest for the monthly transactions, the monthly percentage rate or the MPR will be applied. Both the APR and the MPR significantly vary from bank to bank and the type of credit card you use. It is therefore paramount that while you apply for a credit card, you ask the credit card issuer about how much APR will be applicable on the card.

What Type Of Transactions Attract Interest Charges?

Here are a few cases when the credit card companies charge interest on the credit card transactions:

  • When you fail to pay the outstanding dues within the due date
  • When you pay only the minimum amount due for the month
  • When the amount you repay is less than the minimum amount due
  • When you use your credit card for cash advance. This essentially means that you use the credit card to withdraw money from the ATM
  • When you carry forward the due amount from the previous month to the next month If you pay the outstanding amount on your credit before the due date, the banks will not apply any interest charge.

Factors That Affect The Credit Card Interest Rate

Your personal credit score is one of the most dominating factors that the credit card companies consider while deciding the credit card interest rate. However, there are other factors which affect the interest, which are listed below:

Payment history

Your past repayment history speaks volumes about your ability to repay the dues and your creditworthiness. If the lender sees that you have been disciplined with your repayments and have minimum or no outstanding dues, it will not only increase your credit score, but also help you get credit card at lower interest rate. On the other hand, if you have defaulted on your payments, the credit score will be lower and consequently the interest payable on the credit card will be higher.

The amount you owe

This implies the credit you owe. The credit companies while deciding the credit card interest checks the credit limit sanctioned to you and how much credit you have used. A lower credit ratio will give an impression that you have been responsible with the payments. But, if the credit ratio is higher, be prepared to attract higher interest charge on your credit card.
Apart from the above factors, the length of the credit history, and the type of credits you owe also affect the interest rate.

When is Interest charged on Credit Cards?

Interest on Credit Cards is typically charged under several circumstances, influencing the overall amount owed:

Delayed Payments: If you fail to pay the outstanding balance by the due date indicated on your Credit Card statement, the credit card company will apply interest on the unpaid amount.

Minimum Payment only: Making only the minimum payment instead of paying the full outstanding balance, results in the remaining amount accruing interest.

Partial Payment: When you pay an amount less than the total outstanding due, the remaining balance becomes subject to interest charges.

Cash Advances: Using your Credit Card to withdraw cash from an ATM incurs immediate interest charges, often at higher rates than regular transactions.

Carrying Forward Balances: If you carry over an unpaid balance from the previous billing cycle, interest will apply to this carried-over amount.

It's crucial to note that settling the complete outstanding balance on your Credit Card before the due date, avoids interest charges for that billing cycle. Understanding these scenarios can help users manage their Credit Card payments more effectively and minimise interest expenses.

Credit Card Interest-free Period

The Credit Card Interest-free Period means a specific timeline following the end of a billing cycle, during which, you are not obligated to pay any interest on purchases made using your Card. It serves as a grace period, allowing you to make purchases without incurring additional charges. However, settling the outstanding within this designated period is essential to avoid interest accrual and impact on your credit score.

How To Use Credit Card Interest Calculator?

As discussed above, there are many factors that affect the credit card interest and it can be difficult to calculate the interest manually. To ease the calculation process for the customers, most of the banks provide credit card interest rate calculator on their website; you enter the information in the boxes and the tool will automatically show the interest applicable and the total amount due.

Credit Card Interest Rate FAQs

How is the Credit Card Interest Rate determined?

Credit Card Interest Rates are determined using certain factors such as your credit history, current market rates and the Credit Card type.

What is the average Credit Card Interest Rate?

The interest rate depends on various factors. Different Credit Cards have different interest rates. It is important to note that the rate largely depends on the Card type and your financial behaviour like making timely bill payments and keeping the credit utilisation ratio to a minimum.

How do I lower my Credit Card Interest Rate?

Here is how you can lower your Credit Card Interest Rate:

  • Have a good credit score
  • Negotiate with the issuer
  • Pay bills on time
  • Maintain a low credit utilisation ratio.

Is the Credit Card Interest Rate charged monthly?

The Interest Rate on your Credit Card is charged monthly when you do not pay your Card bill on time, that’s till the end of the due date of the billing cycle.

How to calculate Monthly Credit Card Interest?

Divide the annual interest rate by 12 to determine the Monthly Credit Card Interest

How does the Interest Rate on a Credit Card work?

The Interest Rate on a Credit Card is the amount of interest charged when you transact and do not pay off your dues in full till the due date.

When should I pay my Credit Card bill to avoid interest?

Make a timely full payment before the due date.

Will interest be charged even if I pay the Minimum Amount Due?

Paying only the minimum amount results in interest charges on the remaining balance. It is advisable to make full payments to reduce dependency on credit.

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