Credit Card – All the customers who use credit cards know that the card bill has to be paid on time. For which they are also given extra time, but if the bill is not paid within the stipulated time, then the company issuing the credit card imposes a penalty on you.Today we will tell you how much charge is levied for not paying the bill on time and how it is calculated.
How much does it cost?
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 its customers 14 to 50 days to pay the bill. If a person does not pay his bill even in this time period, then interest is charged on it every month.
This interest rate is mentioned 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, interest increases on your card’s outstanding limit.
The point to note here is that this interest rate is charged based on the amount which is remaining in the limit.
What is the formula for charging interest rate?
First of all, you should know that the later you pay your card bill, the higher the interest rate. Even if you pay the minimum amount due, the bank will charge you interest in this situation. Credit card issuers calculate interest on your outstanding account on a daily basis.
Talking about the formula, its formula is: (Total days from the date of transaction x Balance amount x Monthly credit card interest rate x 12 months) / 365 days
What is a credit card?
A credit card is a financial instrument issued by banks with a pre-determined credit limit, which helps you make cashless transactions. The card issuer determines the 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 deducted from your credit card limit and not from your bank account.