Interest is the additional amount charged by credit card issuers to their customers in case they fail to make the credit card payments in the stipulated time span allotted. The question of paying an interest on credit comes in to play only when there are outstanding payments to be made even after the grace period.
The terms regarding charging the interest such as the interest rate, can be different for distinct credit cards. However, the credit card issuing company starts charging the interest generally in only one situation and that is if the credit taken by the customer is not repaid within the grace period. Even if there is an outstanding balance of $1, the interest calculation on credit cards is instantly executed by the issuers.
Also, if you have partially paid the bill amount and fail to pay the remaining part of the total amount, the interest is charged on the total amount. For instance, if you made a purchase of $100 on the credit card and managed to repay only $99 by the end of the grace period, the interest will be charged on complete $100 and not on $1 from the date of purchase to the date of repayment.
Interest Rates
The interest rate or rate of interest is a factor which is used while calculating the interest on an outstanding payment. Interest rates can vary extensively according to the issuing bank, the type of credit card and the credit history of the customer. Normally, the credit cards in US have interest rates ranging from 7 percent to 36 percent. Also, a few credit card issuing institutions offer schemes and plans to customer with lower rates of interest.
Besides, some banks even have promotional interest rates. The customers can enjoy interest free purchases from some merchants that have a contract with the bank. They also offer 0% interest on balance transfers in some cases if you are clearing off the bills for other accounts.
It is important to get every detail about the interest rate and the interest calculation when applying for a credit card. You should thoroughly read and understand the terms of agreement while buying a credit card in order to avoid further complications.