How Credit Cards Work in India: Fees and Interest

Credit cards in India can be a convenient way to pay, manage short-term cash flow, and build a credit history—but only if you understand how billing, limits, fees, and interest actually work. A card is not “free money”; it’s a revolving credit facility with specific rules set by your bank. The following sections break down billing cycles, credit limits, and the most common charges you may see on your statement.

Understanding Billing Cycles and Credit Limits in India

A credit card billing cycle is the fixed period during which your spends are recorded for a monthly statement. In India, this cycle is typically around 30 days (it varies by bank), and at the end of the cycle the bank generates your statement with the total amount due. After that, you get a “due date” (often 15–25 days later) by which you should pay at least the minimum amount—though paying the full amount is best.

The idea of an “interest-free period” is closely tied to the billing cycle. If you pay the total amount due by the due date, you usually don’t pay any interest on retail purchases (like shopping, bills, and online spends). However, if you don’t pay in full, interest may apply not only to the remaining balance but also to new purchases, depending on the bank’s rules—so the interest-free benefit can disappear until you clear the outstanding amount.

Your credit limit is the maximum amount you can borrow on the card at any time, set by the issuer based on income, credit score, and internal policies. Importantly, your available limit reduces as you spend and restores when payments are posted. Some cards also have sub-limits, such as a separate cash withdrawal limit (cash advance) and sometimes a contactless/transaction limit, which can affect what you can do even if your overall credit limit is high.

Common Fees and How Credit Card Interest Is Charged

Most Indian credit cards come with a mix of fees that depend on usage and card type. Common ones include joining and annual fees (sometimes waived if you meet annual spending thresholds), GST on applicable charges, and late payment fees if you miss the due date or pay less than the minimum. You may also see over-limit fees if you exceed your credit limit (though many issuers now decline transactions instead), and foreign currency markup on international spends, typically a percentage of the transaction amount.

Interest on Indian credit cards is usually quoted as a monthly rate (for example, 3.0%–3.75% per month) and also shown as an annualised figure (APR) for reference. The critical point: credit card interest is commonly calculated on a daily outstanding basis. If you don’t pay the statement in full, the bank can charge interest from the date each transaction was made (or from the statement date, depending on issuer terms) until you pay it off. This is why partial payments can become expensive even when the remaining balance feels small.

Certain transactions start accruing interest immediately, even if you pay the bill on time. The biggest example is a cash advance (ATM withdrawal or cash-like transactions), which typically attracts: (1) a cash advance fee (often a percentage with a minimum rupee amount), (2) interest from the transaction date with no grace period, and (3) sometimes higher interest rates than regular purchases. Similarly, some wallets, gambling/crypto-related categories, or quasi-cash transactions may be treated like cash advances by the issuer, so it’s worth checking the card’s fee schedule and your statement narration.

Used well, a credit card in India offers convenience, rewards, and an interest-free window on purchases—but the fine print on billing cycles, limits, and charges determines whether it helps or hurts your finances. Pay the total amount due by the due date to preserve the interest-free benefit, keep utilisation within your limit, and watch out for fees like late payment, foreign markup, and cash advance charges. When in doubt, review your card’s most recent schedule of charges and statement carefully before making big purchases.