Credit cards are used by everyone nowadays. Due to the reward points and many benefits available in the credit card, people use it more. Most people use credit cards so that they can get expensive products on easy installments.
All customers using credit cards know that the card bill has to be paid on time. For which they are also given additional time, but if the bill is not paid within the stipulated time, then the credit card issuing company imposes a penalty on you.
How much is the charge?
First let us tell you how much time the credit card company gives you to pay the bill. Let us tell you that the company gives 14 to 50 days time to its customers to pay the bill. If a person does not pay his bill even in this time period, then interest is charged on him every month.
This interest rate is referred to as the annual APR (annual percentage rate). This rate can range from 14 percent to 40 percent. Whenever you do not pay the bill on time, the interest on the outstanding limit of your card increases.
The thing to note here is that this interest rate is calculated according to the amount that is left in the limit.
What is the formula for applying the interest rate?
First of all, you should know that the more late you pay the card bill, the more the interest rate will increase. If you give the minimum amount due, then even in this situation the bank will charge you interest. Credit card issuers calculate interest on your outstanding account on a daily basis.
Speaking of formulas, the formula is: (Total days from transaction date x Balance x Monthly credit card interest rate x 12 months) / 365 days
What is credit card?
Credit card is a financial instrument issued by banks with a pre-defined credit limit, which helps you to do cashless transactions. The card issuer sets a credit limit based on your credit score, credit history and your income.
The best thing about a credit card is that it is not linked to any bank account. So, whenever you swipe your credit card, the amount is not deducted from your bank account but from your credit card limit.
