Credit Card Loans can be a smart way to handle financial emergencies, and they can be obtained with fast approval and zero documentation. You can use the money for various expenses like travel, education, any big-ticket purchase, etc. However, getting a clear understanding of the interest rates on the loan can help you manage the loan easily. Read this blog to know everything essential about a Loan on Credit Card interest rate in 2025.
What are Credit Card Loan Interest Rates?
When you take a loan on a Credit Card, an interest rate is charged, similar to regular loans. This rate represents the cost you pay for carrying forward your outstanding balance instead of paying it in full. However, they are applied monthly, depending on the bank. It’s important to be aware of the Loan on Credit Card interest rate and repayment terms before opting for a loan on your Credit Card.
Understand How Credit Card Interest Is Calculated
Although the interest rate is shown as an annual figure, it is calculated on a daily basis. Here’s how the process works:
1. The annual interest rate is divided by 365 to calculate a daily interest rate.
2. This daily rate is applied to your unpaid balance.
3. The result is multiplied by the number of days the balance remains unpaid.
For example, if your APR is 36% annually, the daily interest rate would be around 0.098%. If you carry an unpaid balance of ₹10,000 for 30 days, the interest would be:
10,000 x 0.098% x 30 = ₹294
It shows how quickly interest can grow, especially if you’re not paying off your balance on time.
Understanding the Grace Period and Minimum Payment
Credit Card Loan repayment is done in monthly instalments on your Credit Card bill. When you pay your Credit Card bill in full within the due date, you usually get a grace period of 20 to 45 days. During this time, no interest is charged.
However, if you can’t pay the full amount, you must at least pay the minimum amount due. This is usually either a fixed amount like ₹200 or 5% of your total outstanding balance, whichever is higher. Paying only the minimum helps you avoid late fees, but the remaining amount will still attract interest. Over time, this increases your total repayment significantly.
What Factors Affect Loan on Credit Card Interest Rate?
Many factors can influence the interest rate you pay on a Credit Card Loan:
1. Type of Credit Card
The rate of interest mainly depends on the type of Credit Card you are using. For example, premium cards or rewards cards generally come with higher limits and higher interest rates.
2. Bank policies
Different banks have different APRs, which can range from 30 to 52% annually. Check your bank’s Credit Card before getting the loan.
3. Credit score (CIBIL score)
If your credit score is low, your interest rates might be higher, especially on CIBIL-based Credit Cards.
4. Transaction type
Cash withdrawals or cash advances usually attract interest from the day of the transaction and may include additional charges.
5. Credit Utilisation Ratio
If you use more than 30% of your credit limit regularly, banks may consider you a high-risk borrower.
What is a CIBIL-based Credit Card?
A CIBIL-based Credit Card is one where your credit score, managed by CIBIL (Credit Information Bureau India Limited), plays a key role in your approval and terms. If you have a high CIBIL score:
- You are more likely to get a Credit Card with a lower interest rate.
- You may qualify for higher limits and better benefits.
On the other hand, a low score can limit your options or lead to higher rates.
Maintaining a good CIBIL score by making timely payments and not maxing out your card is important for your overall financial health.
How to Reduce Your Credit Card Interest Costs?
Here are some of the key ways to keep your interest charges low:
1. Pay Full Bill on Time
Pay your total Credit Card bill before the due date to enjoy the grace period and avoid interest. It also helps maintain a good credit score and saves you from late payment charges.
2. Avoid Cash Withdrawals
Using your Credit Card to withdraw cash attracts high fees and interest from day one. There’s no grace period, so avoid it unless it’s an emergency.
3. Convert Big Buys to EMIs
For large purchases, ask your bank to convert the amount into EMIs. It reduces the interest rate and makes repayment easier and more manageable.
4. Use Balance Transfer Offers
Shift your high-interest Credit Card balance to another card with a lower rate. This helps reduce interest costs and gives you breathing room for repayment
5. Keep Usage Below 30%
Try to use only up to 30% of your credit limit. A low Credit Utilisation Ratio improves your credit score and shows responsible financial behaviour.
These steps not only save money but also protect your CIBIL score.
Conclusion
In 2025, Credit Card Loans will continue to evolve as a convenient way to access funds instantly. However, customers must read the loan documents carefully and understand the loan terms. By understanding how loan on Credit Card interest rate works, checking your CIBIL score regularly, and converting the repayment into EMIs, you can use your Credit Card more wisely and maintain financial stability.
