The Reserve Bank of India has announced a big relief for credit card users. Users need not pay interest on Credit card till 3 days. In this article, we will understand this new rule and know how interest is calculated on credit card.
RBI has introduced a three-day window before a delayed payment is treated as overdue or charged with penalties.
Under the new rules, a credit card account will be marked as “past due” only if the payment is not made for more than three days after the due date. Late payment charges and penalties will also be applied only after this three-day period.
The rules also change how late fees are calculated. Banks can now charge penalties only on the unpaid amount after the due date, not on the full bill amount.
However, the RBI has clarified that the delay will still be counted from the original due date mentioned in the statement. This means the delay starts from day one, but penalties will apply only after three days.
For customers, this gives a small relief. If you miss the due date but pay within three days, you will not be charged late fees or see any impact on your credit report.
However, the due date does not change. Interest charges and billing cycles will remain the same. Any delay after the due date will still be recorded internally. So, this change only delays penalties, but does not reduce the importance of paying on time.
The new rules will come into effect from April 1, 2027. Banks and credit card companies will use this time to update their systems and inform customers.
How interest is calculated on credit card?
Credit card interest is calculated by applying a daily periodic rate (APR divided by 365 or 360) to your average daily balance over a billing cycle.
It is calculated from the date of purchase until the balance is paid, often resulting in 40%–60% annualized rates. Interest is only charged if you pay less than the total outstanding balance by the due date, and it also applies to new purchases if you fail to pay the full previous balance.
This interest is calculated on a daily basis using the formula: Interest = Outstanding Amount × Daily Interest Rate × Number of Days.
Credit card interest is charged only when you do not pay your full bill by the due date. If you pay the entire outstanding amount on time, no interest is applied. However, if you pay only a partial amount or the minimum due, the bank starts charging interest on the remaining balance.
This interest is calculated on a daily basis using the outstanding amount and the card’s interest rate, which is usually around 3% per month (about 0.1% per day). For example, if your unpaid amount is ₹8,000, interest will be added every day until you clear it.
An important point to remember is that once you don’t pay the full bill, the interest-free period is removed, and even new purchases start attracting interest immediately. Paying only the minimum due helps you avoid late fees, but interest keeps increasing, making your total payment higher. Therefore, it is always best to pay the full credit card bill on time to avoid extra charges.
