1. Start with APR, not the small monthly number
Card issuers must disclose annualised percentage rates for relevant situations. APR makes it easier to see how expensive revolving card borrowing can be when compared on an annual basis. The actual rupee charge still depends on the issuer calculation method, the outstanding amount and the number of days different amounts remain unpaid.
2. Interest follows the outstanding balance over time
If you do not clear the total amount due, finance charges can be applied to the relevant outstanding amount under the issuer disclosed method. Payments, refunds and reversals reduce the amount on which interest should be calculated when credited. RBI directions require interest to be levied on outstanding amounts adjusted for such credits rather than blindly on the original total amount due.
3. Partial payment can affect transaction-level timing
When the full statement is not paid, the interest-free period can be lost and finance charges may be calculated from transaction dates on outstanding purchases according to issuer methodology. That is why “I paid half the bill, so I should owe half a month of interest” is often wrong. Timing matters.
4. Read the issuer worked example
RBI requires issuers to explain finance-charge calculation with illustrative examples, particularly for partial payments. Your MITC, welcome kit and statement are important documents. If you are carrying a balance, use those terms to estimate total rupee cost and compare structured repayment before making new discretionary purchases.
5. Quick check
Which is the best number to compare the borrowing cost of two credit cards?