Credit Card Interest Calculation: Do you also use your credit card frequently, but your head spins when the bill arrives? And then you think you can get away with just paying the minimum due? If so, you're falling into a big debt trap, because the interest charged on credit cards is much higher than any other loan. Let's understand how credit card companies charge you interest and what mistakes can ruin your budget.

Paying only the Minimum Due is the Biggest Mistake.
Most cardholders think that paying the minimum due of 5% will save them from interest charges. This is completely wrong. Paying the minimum due only saves you from late payment fees, but heavy interest continues to accrue on the remaining amount.

How is Interest Calculated?
Credit card interest is determined based on the Annual Percentage Rate (APR), which is usually between 36% and 48% per annum. It is calculated based on the daily average balance. There is a specific formula for this, which is as follows: (Outstanding amount x Interest rate per month x Number of days) / 30

What is the Interest-Free Period?
You get an interest-free period of 45 to 50 days on your credit card. But remember, if you haven't paid the full bill from the previous month, interest will start accruing on new expenses from the very first day. This means you will no longer have the interest-free facility.

GST on Interest, Service Charges, and Late Fees
Most cardholders are unaware of this. In fact, not only is interest charged on credit cards, but an 18% GST is also levied on all service charges, late fees, and interest. This means the more interest you pay, the more tax you pay.

The Big Mistake of Withdrawing Cash from ATMs
If you withdraw cash from an ATM using your credit card, never make this mistake again. Because there is no interest-free period for cash withdrawals, heavy interest and transaction fees start accumulating from the moment you withdraw the money.

How to Avoid High Expenses? Try to make the full payment before the bill's due date. Even a one-day delay in payment can result in hefty penalties and interest charges.

Review your statement carefully every month to avoid any charges you didn't incur.

Always remember that a credit card is a great tool, provided it's used wisely. On the other hand, ignoring its rules can lead you into a debt trap.

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