How many times have a got a shock when you received your credit card bill?. It is very common for some of us to make sure that credit card companies get wealthy at our expense. It was in 2008 when I got the first shock. I had spent Rs.28002.5 on the card and for some reason I paid Rs.28,000.
Do you know how much was the charges levied? It was approximately Rs.1684 including all late fees, interest and taxes. That is a day when I realized ‘never have outstanding on credit cards as much possible. But how do you know how much you’ll be charged and why?.
You might have faced a similar situation and didn’t know how the Bank arrived at so much charges/fine. Hence we are sharing How to calculate credit card late payment fees and finance charges.
Financial organizations such as banks issue the credit cards, which is a payment card. And they do it for a reason. credit cards are one of the most profitable products/divisions of a bank.
How credit cards work?
Imagine this, the banks get typically 9%-11% on home loan per annum. The same is 15% for personal loan. However for a credit card it is anywhere between 24-43% per annum on outstanding amount. This is without the fine amount or late payment fee as they like to call it 
.
It gives the authority/permission for the cardholder to purchase goods and make payments for services at later date. The issuer creates the account as a revolving credit account and agrees to a particular amount of the credit limit. The user then pays the due amount within the time period or has to pay with interest and charges after the time period.
Credit card is different from the charge card. A charge card typically requires monthly payment. In contrast, the credit card holder can continue to utilize the line of credit each month and debt, subject to payment on time or the payment of the interest as imposed by the issuing bank.
The size of the card follows the ISO/IEC 7810 specifications. The magnetic strip on the card enables the user to carry out the transaction at any outlet that accepts credit and debit cards for purchases. The advantage of the credit card is it is usable across the globe. The exchange rate and fees differ from one institution to another and according to the prevailing rate at the time of the transaction.
In addition to the use of the swipe machines, merchants also accept verbal authorization via the telephone under the card, not present transaction (CNP) procedure. It is essential for the cardholder to carry such a transaction with utmost conscience. They have to ensure that the merchant is a valid PoS(Point Of Sale/Service).
The point-of-sale terminal uses the machines to verify the card authenticity by linking it to the bank database. As soon as the magnetic strip receives authenticity, the deduction occurs automatically, and the buyer signs the receipt of the purchase.
The chip system on the card is the new member of the ISO group and helps in storing every detail of the card transaction. For CNP transaction, merchants verify the authenticity and physical possession of the card by asking additional security code printed on the backside of the card, expiry date, and billing address.
A few banks also offer the flexibility to send PIN code for online transactions to the registered mobile number. Such a step avoids the misuse of the card by any other person.
As a cardholder, you will receive monthly statements via email or through post in physical form. The statement contains details related to the transactions performed in the last month, the total amount owned, outstanding fees, due date and chargeable amount if paid after the due date.
The card issuer specifies the minimum amount payable by a particular date. The issuer will charge a penalty for late payment and additional charges as stated at the time of applying for the card.
You can also view your monthly statements at any time by choosing online banking option. Upon registering, you can login to your banking account from your comfort and choose to view monthly transactions, get statements and pay credit card bills.
You can also set instructions to pay the credit bills to a defined amount every month on a specific date. The multiple payment options within the statement period enable you to utilize the credit limit to the maximum and in several ways.
Related post: 10 ways to get loans fast by improving credit score
How to calculate Credit card Late payment fees and finance charges
The calculation of the late payment fees and finance charges differs from one issuing bank to another. The 
organization calculates the interest on the outstanding credit balance. It is essential for you to memorize and adhere to the finance charges by the credit card issuer to avoid unwanted expenses in the end.
Like you, many others give importance to the annual charges, card renewal fees, add-on card charges and transaction fees. However, it is imperative for you to consider the interest rate, which typically creates a nightmare if you do not understand the particulars in detail.
Every bank in India calculates the interest rate as a monthly percentage (that changes according to the RBI instructions) and on the average daily balance method. The formula to calculate the interest is as follows:
Calculated interest = (outstanding amount x monthly percentage x 12 months) x No. of days/365
Another vital point, which you should examine, is the grace period offered by the banks. The grace period is usually one cycle(during initial card grant period)+20 days. This si a revolving credit period. If you repay the amount within the grace period, you will avoid the late payment and finance charges.
In my case, my statement is generated on 10th of month and due date is usually 30th of month. I have 50 days grace period. So when I swipe my card on 11th Jan 2015, the charge will reflect in 10th Feb 2015 statement and my payment is due on 1st March. This period from 11 January-01 March is grace period.
Nevertheless, if you do not complete the payment within the stipulated time, you will have to shell out additional amount in terms of fees and taxes. The grace period varies from one bank to another and according to the type of credit card.
Consider the following example that explains in detail about the credit card late payment fees and finance charges:
Let us say that X Bank credit card has a grace period of 60 days. The billing date is on eighth of every month. The cardholder is free to use the card from 9 January to 7 February. The bill generates on 8 February, and the due date is usually 10 March. The credit period for different purchases changes according to the date. For example, the credit grace period for a purchase made on 20 January is 49 days, and the credit period for 15 February is 23 days.
The interest rate is applicable for withdrawing money from ATMs using the credit card. There is no grace period applicable to this transaction, and every bank charges the interest rate right from day one.
The addition of the interest rate continues until you make the repayment. You will have to be careful while withdrawing money from ATMs. The interest rate is usually 3.5% interest per month and a one time fee of Rs. 300 or 2.5% of withdrawal amount(whichever is higher).
Every bank in India specifies a due date and the minimum amount you have to pay for the total purchases carried out. If you do not pay the minimum amount and if the entire amount is due, the bank will impose interest on the outstanding amount along with the spending in the current month.
It continues until you repay the debt amount in full. Additionally, if you fail to repay the amount, the bank cancels the grace period from the following month. You will also lose the grace period if you choose cash advancement option using the credit card.
The late payment fees add to the already debt and increases the overall payment. Banks charge the credit card late payment fees if you neglect to make the payment before the due date. The price varies according to the card, bank, and the outstanding amount.
For instance, HDFC bank charges Rs. 500 as late payment fees for credit bills worth between Rs. 5,001 and Rs. 20,000. It goes to Rs. 700 if the credit bill is above Rs. 20,000. For this reason, the late payment fees change according to the debt amount you possess on the card.
Below is the illustration to calculate the late payment charges. We are assuming that the due date is 18th of every month, and there is no outstanding credit balance as due. We also assume that the monthly interest rate is 3.60%, and the late payment fee is Rs. 400. Below is the transaction detail:
| Date | Transaction | Amount |
| 10 March | POS Purchase – Reliance Digital | Rs. 20,000 |
| 15 March | POS Purchase – Nike | Rs. 8,000 |
| 18 March | Statement date | Due Amount = Rs. 28,000Minimum Amount Due = Rs. 1,000 |
| 12 April | Payment to Credit account | Rs. 1,000 |
| 14 April | POS Purchase – Petrol | Rs. 3,000 |
| 16 April | Payment into Credit Account | Rs. 20,000 |
On the statement date, the bank calculates the amount payable using the formula and add late payment fees. Hence,
- Interest on Rs. 20,000 @ 3.60% pm from 19 March to 11 April (i.e. 24 days) = Rs. 568.109
- Interest on Rs. 19,000 @ 3.60% pm from 12 April to 14 April (i.e. 3 days) = Rs. 67.463
- Interest on Rs. 8,000 @3.60% pm from 19 March to 14 April (i.e. 27 days) = Rs. 255.649
- Interest on Rs. 7,000 @ 3.60% pm from 16 April to 18 April (i.e. 3 days) = Rs. 24.854
- Interest on Rs. 3,000 @ 3.60% pm from 14 April to 18 April (i.e. 5 days) = Rs. 17.753
Therefore, the total interest is = Rs. 933.828
Considering a credit card late payment fee of Rs. 400, sales tax at 12.36%, additional charges, and principal balance amount, you will pay:
Total Amount Due = Total interest + Late payment fee + Service tax + Outstanding amount
= Rs. 933.828 + Rs. 400 + Rs. 115.421 + (Rs. 3,000 + Rs. 7,000)
= Rs. 11,449.249 = Rs. 11,449.25 (round-off) + additional charges
The finance costs and other fees are subject to alteration from time to time and at the sole discretion of the bank. In addition to these fees, the card issuer also charges overlimit penalty if you exceed the credit limit of the account.
Remember, even if you have Rs 100 balance in your credit card payment, the bank will calculate interest for entire outstanding amount as per last bill. All your new transaction will also cease to have grace period and will be charged interest instantly.
The above illustration will give you an idea about the credit card late payment fees and finance charges. Go through the Most Important Terms & Conditions document of the bank to understand the interest rates and the grace period.
You can get more clarity, if you go through below documents from specific banks. But like all financial calculations, its little boring to read though :).
- SBI Credit Card Charges & Conditions
- HDFC Credit card Terms & Conditions , PDF document
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Hi… Can shed some light on automatic deduction of finance charges from available balance in hdfc Bank.. Also the same is showing in my also.. Doesn’t the mean they charging me twice.. As they have already deducted finance charges they should not put that in my bill.. I have to pay finance charges on my bill also and automatic deduction also happened.. I am very confused.. Please help
My credit card payment is 14950 due date on 31/05/2017. I am unable to pay the amount as same day. so if i pay after due date on 01/06/2017 ,,,I will pay the amount to bank with interest charges ???
Hi my name is shareef my younger brother Andullah has swipe his Visa card to purchase ticket from Riyadh to Bangalore for Saudi riyal 3000/ in 209 he didn’t go back due to bike accident now he wanted to pay back that money how much he has to pay he is in Dubai now the Visa card belongs to Saudi American Bank can you please reply us thanks
Sir , I want to draw cash from SBI simply credit card and payback in 10 days , ex I withdraw Rs. 15000 on 5th and pay back on 15th . what will be charges paid by me . My limit is Rs.18000/- . Please enlighten me . Tghank you
Yours
Dr. M.V. Seshaiah
SBI esteemed Customer
Sir my name is Srikanth and having hdfcbank credit card and my total due is for 43200/- and minimum due to pay is 4705/-on 8th of March. So I wanted to know if I pay minimum due amount now and how much will be the interest on balance amount 39000/-.pls tell me and I am confused. I will not make any purchase until clearing this total amount.
hi i got a credit card of 70000/- limit i have used the entire amount now i have converte some money into emi 25000/- and its has passed 2 months now paying min amount monthly like 7500 now they saying my card is in blocked if i pay the entire amount would my card release or not
my total amt 2750 min due amt 200 due on Nov 2.i am not paid yesterday.so one day gone.trw i pay only min amt 200rs.how much interest added in my credit card.
Hi Credit card payment due date was October 9th and the amount was 4500 I made a purchase for 4000 after that and I could;t make the payment.If I pay it tomorrow how much would be amount?
my credit card payment due date 8.10.2016 today is holiday i want to know that how to deposit the money pl tell me what t do or give me some grace period
My credit card payment is 3600.27 on 24/7/2016. I am unable to pay the amount as the day is sunday.so if i pay on 25/7/2016 ,,,wil the bank charge me with interest ???
Total amount due 15000 .Statement date 23rd of april and due date is 11th May.I have paid 10000 before due date and remaining amount within a week.Will the interest be on total amount due or the amount that remained after due date
HI SIR,
I WANT NEW CREDIT CARD. WHAT THE BANK INTEREST IS VERY LOW AND BENFITS. TELL ME PLE
Hi In my card total amount due date(25-02-2016)is 132,292.09 I had made the payment 1,25,592 on 25/02/2016.Rest of the 6,700 amount I payed on 29-02-2016. Due to bank holidays I am unable to make the payment. next month bill cycle interest changes are added 9,465. Is it correct. Interest Rate – 3.83% pm (Annual 46%) . Bank people was telling Annual charges was 46% is correct. Can you please confirm.
my credit emi due date was 15 feb and i have paid through smart pay on a same day.
it shows it will reflected after 3 days, do i need to pay interest?
My credit card bill of Rs 9181.65(HDFC) was generated on 8th of Jan and due date was on 28th January.
I paid the full amount on 28th January,2016. By Mistake I forgot to Pay 65 Paise. When I got Bill 8th Feb Extra Charges Finance Charges and Services charges including Rs473.Can you explain this.
my credit card payment Rs 20046 I am Pay 200 Rs short please advise me i am next month how much paid interst in 200 rs
My card is due on 7th Feb of amount 13,312.. If I pay the full amount on Feb 10th I.e. after 3days bcoz I get my salary on 10th ..how much will I be charged on 10th or 11th when paying the amount. Please reply
Rahul, the extra amount(late payment charges, interest) will reflect only in your next statement. It should be around 600-800 rs depending on which institution.
My credit card bill of Rs 227,364 was generated on 15th of December and due date was on 06th January.
I paid the full amount on 7th January,2015. What is the amount I will have to pay as finance charges.
Hi Gurdeep
Please use sample calculation as given in the post.
Hi,
My bill got generated on Dec 22 with due date of 8th Jan
My bill was worth 43753, I paid 30000 on 8th Jan and remaining on 9th Jan how much fine I have to pay
Hi Bhavisya
Depends on which bank and their charge schedule. Typically for Rs 14000 outstanding, I guess late fee will be 600-700. On top of that interest will be Rs 1300 approx. I believe it will be close to Rs 2000 in next bill provided you make no fresh purchase.
Sorry, I assumed 14000 was still outstanding. But if u paid remaining amount on next day, the late fee will be same but interest will be minimal. Should be close to 700 in total.
Hi Parsha,
In the above case, would the bank calculate interest for fresh spends after 9th Jan?
As you mentioned, in case if there is any outstanding amount there will not be grace period for the next billing cycle. In this case, would there be a grace period as the previous outstanding amount is already paid?
Thanks,
AJ
Sir
The due date for my card was 23rd December. I made complete payment on 22nd December via ICICI click to pay through SBI net banking. Since 24th – 27th December was holiday, the amount was transferred to tICCI on 29th December. Now I have been charged both late fees and interest. Please tell whether this is right and what can i do.
Hi Ashish
I believe you must have transferred after NEFT timings in the evening. The bank will account the credit on the day it receives the fund and not when you transfer. You can check with bank(SBI) why transfer didn’t go on time but ICICI can’t be blamed in your scenario.
If this is the first time, call ICICI helpdesk and explain . Depending on the guy attending and resolution officer they may cancel it for first time on goodwill basis. It happened to me with HDFC credit card in 2010 and my late fee was reversed.
Sir
November month, 2015
Total outstanding Rs.50200
card limit 40000
Rs 15000/- paid on 26 november 2015
what should be pay on december 2015
Hi Krishna
Depends on card interest rate, payment due date, free look period. Please use above sample in post to make the calculation . It should be close to Rs 2700 approx.
I have paid minimum charges then what is period to pay other amount so that didnot loose my grace period.
Hi Satyendra
There is no grace period in current month if you fail to pay your entire amount as per last statement.
“Remember, even if you have Rs 100 balance in your credit card payment, the bank will calculate interest for entire outstanding amount as per last bill. All your new transaction will also cease to have grace period and will be charged interest instantly.”
What is the normally the higher limit for the having a outstanding due from previous month and my grace period not becoming nill for the current month? For example say, I have Rs 1 due to be paid from last month and in next month I again make transaction of say Rs 10000 and now I expect to pay the entire due amount within stipulated due dat, I expect to pay Rs 10000 + Rs 1 + Late fee interest on Rs 1 or the last Late fee interest will be calculated on entire Rs 10001, effectively making my grace period for this month 0.
Hi Deb
Your grace period is zero if you have outstanding from last month. You have to pay interest on all new purchases.
Know your credit card:
Finance
charges -The finance charges are paid based on a monthly percentage
interest rate ( say 2.65 %) and is calculated on a average
daily balance method for
most credit
cards in India. This is calculated by the simple formula:
Interest calculated = (outstanding amount x 2.65% per month x 12 months) * no.
of days / 365
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. 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. So, a credit card holder whose billing date falls on 4th of the month can spend on his credit card from 5th April to 4th May, his bill will be generated on 4th May and his Payment Due Date will be 29th May. 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. So, if a credit card holder withdraws cash using his credit card, the interest rate is applied to the amount from the very first day and will apply till the amount is repaid in full.If a credit card holder doesn’t pay his bill completely before the due date, his entire outstanding balance will attract interest rate and
all new spends on the credit card will also attract interest rate until the balances are repaid in full. This essentially means that if a Credit card holder doesn’t repay his outstanding balances in full every month; there is no grace period for him. Taking cash advances
from the credit card also takes away any grace period.
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. 350 as the late payment
fees for Credit Card bills up-to Rs. 10000, Rs. 500, for Credit Card bills between Rs. 10000 and Rs. 20000 and, Rs. 600 for Credit Card bills above Rs. 20000. 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 2.65% as monthly interest rate and a late payment penalty of Rs.350/
The
charges are calculated from the statement date.
Interest on Rs 15000 @ 2.65%pm from 18 November to 15 December (i.e. for 28
days)
((15000 x 2.65 x 12 x 28)/365)/100 = Rs.365.91
Interest on Rs 13000 @ 2.65%pm from 15 December to 17 December (i.e. for 3days)
((13000 x 2.65 x 12 x 3)/365)/100= Rs.33.97
Interest on Rs 5000 @ 2.65%pm from 18 November to 17 December (i.e. for 30
days)
((5000 x 2.65 x 12 x 30)/365)/100 = Rs.130.68
Intereson Rs 3000 @ 2.65%pm from 17 December to 18 December (i.e. for 2
days)
((3000 x 2.65 x 12 x 2)/365)/100 = Rs 5.22
Interest on Rs 1000 (fresh spends @ 2.65%pm from 16 December to 18 December
(i.e. for 3 days)
((1000 x 2.65 x 12 x 3)/365)/100 = Rs 2.61
a) Thus total interest = (365.91+ 33.97+130.68+5.22+2.61) =Rs. 538.39
b) Late payment charges = Rs.350
c) Total principal amount outstanding = Rs. 4000 (Rs.1000 fresh spend + balance Rs. 3000 outstanding from last month’s billing period)
Hence Total Amount Due = (a) + (b) + (c) = Rs. 4888.39 + Service tax as applicable on interest and other charges.
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
Why intt for 19000 is charged upto 14 aprl not upto payment date i.e. 16 april