Smart things to know about interest charged on credit cards

Here is a look at 5 things you should know about the interest charged on credit cards

1) Interest is charged on the outstanding balance on a credit card if only the minimum or partial amount is paid by the specified date, not the full amount that is due. This is called the 'revolving credit facility'.

2) There is an interest-free period, during which the amount used on a credit card does not attract any interest. This is the duration between the first day of the billing cycle and the day on which the payment is due.

3) If a credit card is on revolving credit, all new purchases on the card will also attract the interest rate from the transaction date till such time that the dues are cleared. There is no interest-free period till all the dues are paid.

4) The interest rate is typically disclosed by the credit card companies as a monthly percentage. The interest payable depends on the rate, outstanding amount and the number of days for which the amount due remains unpaid.

5) A late payment fee is charged if the due amount is not paid by the specified date. Service tax is applicable on interest and other fees and is included to ascertain the total amount that is due.