New Delhi [India], February 13: You may wish to purchase expensive things like electrical appliances or gadgets when using a credit card. This is one of the biggest benefits of credit cards. You can make such purchases and simply pay for them later when the credit card statement comes the next month. But if you aren’t able to pay off these bills, your credit card balances will be affected. Banks may charge heavy interest rates on these credit balances.
So, let’s dive deep into credit card interest rates and uncover things that you may not know yet. There are also some helpful tips to avoid paying these high-interest charges. Whether you're looking to manage your current card or planning a credit card apply, understanding these strategies is essential for financial well-being.
What is a Credit Card Interest?
Whenever you use your credit card and fail to pay the balance in the next billing cycle, you accumulate credit card interest. This interest rate is quite high, which is why most users pay it off the next month. If you have an outstanding credit card balance, the bank or card issuer will charge you hefty interest. You must pay this additional amount and the balance in the next billing cycle. Credit card interest rates may vary from bank to bank and depend on the different annual percentage rates (APRs) and monthly percentage rates (MPRs).
Credit Card Interest Rates 2025
In the current year, the interest rates on credit cards may have changed for many banks. Some banks in India charge interest as low as 24% on the balance payment of credit card bills, while some other banks charge as high as 52%.
For example, you may have made a large purchase of, say, ₹50,000 with your credit card. In the next billing cycle, you are only able to pay off ₹10,000. This means the balance of ₹40,000 will accumulate interest until the next billing cycle. Considering an average interest rate of 40%, this means your ultimate payment the next month will end up becoming ₹40,000 + ₹16,000 (i.e. 40% of the balance). So you will have to pay a massive ₹56,000.
This is why it’s always best to pay off your credit card statement in full.
How is the Interest Rate Calculated?
Banks will generally calculate the interest to charge on your credit card balances based on the annual percentage rate (APR) and the monthly percentage rate (MPR). The APR is the interest charged on your credit card balance per year. Meanwhile, the MPR is the interest rate charged every month.
Banks usually calculate the APR and MPR based on your credit history and CIBIL score. For example, if your bank gives you an APR of 20%, then the MPR would be 1.67%. Your bank may also consider your credit utilisation ratio to assess a proper interest rate for you. However, you will have to pay these interest charges.
Is it Possible to Lower the Interest Rate?
This is quite difficult if you have a bad credit history or a low CIBIL score. The only way to lower your credit card interest rate is by continuing to pay your credit card bills duly. When you keep doing this in a disciplined way for a couple of years, your bank will perceive you as having higher creditworthiness. It will also increase your CIBIL score. After that, if you leave some credit card balance, your bank may charge you a lower interest rate.
Tips to Avoid Credit Card Interest
To avoid these high-interest charges, you can follow these tips judiciously.
Avoid making late payments on your credit card bills. You should ideally pay off the entire debt at least 1 week before the due date. In this way, you no longer need to pay any interest on the balance.
Never withdraw cash from an ATM using your credit card. When you do this, a high interest rate is automatically charged for this withdrawal.
Credit card interest rate is compounding. So when your unpaid balances accumulate for a few billing cycles, so does the interest on it. By not carrying forward these balances, you can avoid paying high-interest charges.
Conclusion
In conclusion, to avoid high credit card interest rates, it's important to pay bills on time, avoid cash withdrawals, and also keep good credit history. Doing this can help you save money and manage your finances better