If you fail to pay your entire credit card bill by the due date, you will be charged interest on the entire outstanding amount. This will happen even if you have made a part payment. For example, if you have paid ₹30,000 on a bill of ₹50,000, you will be charged interest on the entire ₹50,000 till a fresh payment is made and a new credit card statement is generated.
"If the entire bill hasn't been cleared, then there's a problem. Interest will be levied on the complete amount, till the first payment. Interest on balance amount will be levied for the remaining days till the new statement is generated," said Adhil Shetty, chief executive officer, Bankbazaar.com, an online marketplace for financial instruments.
Let's assume your billing cycle is 30 days and you shop on 5 June for ₹30,000. On 25 June, you get your statement for which the due date for payment is 10 July. Now, on the due date let's suppose you pay only a portion of the bill, say ₹20,000 instead of ₹30,000. You will be charged interest on the entire ₹30,000 from 5 June to 10 July (35 days).
Another way of understanding this is that the standard interest-free period of 30-40 days gets terminated. In addition, you will also be charged goods and services tax (GST) at the rate of 18% on the interest amount and any penalty charged by the bank, Shetty said.
When you make fresh purchases on your credit card in the new cycle, say you buy something worth ₹5,000, interest gets added on that too. Now, as usual, you get the new statement on 25 July. Here you realize that you have paid interest on the ₹30,000 outstanding on the previous bill and on the fresh purchase you made in July.
Experts recommend that you should pay your entire credit card bill on time to avoid this hefty interest charge. Alternatively, covert your unpaid amount to equated monthly instalments (EMIs) if you do not have the financial ability to pay.
Conversion to EMIs can help avoid interest on the part paid amount that gets levied in case of outstanding dues, said Shetty.