The interest rate charged on your credit card makes your ownership a nightmare if you don't know it in perfect detail. Here's a primer for you.

T he interest rate charged on your credit card makes your ownership a nightmare if you don't know it in perfect detail. Broadly the credit card finance charges represent the interest charged on outstanding credit card balances. Finance charges are the most important part of any credit card terms and should never be ignored. Many credit card holders pay more attention to the annual fees, card-renewal fees, add-on-card fees, etc while applying or using a credit card but actually it is the interest rate that makes your credit card ownership a nightmare if you don't know it in perfect detail.

We take a look at how the finance charges and other fees are calculated for your credit card expenses. First let us take a look at the most important aspect about the finance charges levied by credit card companies.

The finance charges are paid based on a monthly percentage interest rate say 2. Then there is a thing called the grace period, during which the balances on credit card do not attract finance charges provided the credit card holder repays the entire outstanding amount in full with the monthly credit card bill.

The grace period varies with every credit card and usually is between 20 to 60 days.

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It is also called the interest free period. For example, the HDFC Bank Platinum Plus Card has an interest-free credit period of 55 days. Therefore a purchase made on 14th April will have a credit period of 46 days, while a purchase made on 2nd May will have a credit period of 23 days. The cash advances taken from credit card do not enjoy any grace period and this is applicable for almost every credit card issued in India.

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Taking cash advances from the credit card also takes away any grace period. Another thing that increases the credit card bill very often is the late payment fees. This fees or penalty is levied when the monthly payment doesn't reach the credit card company before the due date.

Again this late payment fees vary with credit card and outstanding amount.

For example the HDFC Bank Platinum Plus Card charges Rs as the late payment fees for credit card bills up to Rs 10,, Rs for bills between Rs 10, and Rs 20, and, Rs for bills above Rs 20, Depending on the outstanding balance this amount can really add up. Let us now take a look at the method of calculating various charges. Here we assume that there are no outstanding balances before 10 November and the credit card bill has to be repaid before 18th of every month.

The credit card company charges 2. Interest on Rs fresh spends 2. This example above will help you get an idea how the credit card company charges interest rate on your credit card outstanding balances. In addition to the interest rates and late payment penalties, cash advance fees which is usually a percentage of the entire cash withdrawn , over limit fees which is charged when a credit card holder jumps his credit limit , annual fees and other charges detailed in your credit card terms and conditions are also added if they are due and have to be repaid with the credit card bill.

NewsApp Free Read news as it happens Available on. Here's a primer for you T he interest rate charged on your credit card makes your ownership a nightmare if you don't know it in perfect detail. HDFC Bank Platinum Plus Card , India.

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