Understanding Finance Charges on an HDFC Credit Card

Finance charges on an HDFC credit card refer to the interest fees that are applied to the outstanding balance if it is not paid in full by the due date. It is important to understand the mechanics of these charges to avoid unnecessary penalties and manage your finances more efficiently.

Calculation of Finance Charges

Finance charges are typically calculated based on the average daily balance or the outstanding balance at the end of the billing cycle. The method used can vary by credit card issuer. HDFC specifically uses the outstanding balance at the end of the billing cycle to calculate finance charges for its credit cards.

Different Interest Rates

The finance charge on an HDFC credit card is determined by the interest rate, also known as the Annual Percentage Rate (APR), applicable to the card. HDFC credit cards often have different APRs for different types of transactions, such as purchases, balance transfers, and cash advances. For instance, cash advances might carry a higher APR than regular purchases due to the higher risk associated with them.

Grace Period and Open Balance

One of the key points to note is the grace period. If the cardholder pays the full balance by the due date, they may avoid finance charges. However, if only a portion of the balance is paid, finance charges will apply to the remaining amount. It's important to monitor your account to ensure that you are aware of any outstanding amounts that might accrue finance charges.

Cash Advances

Cash advances are a convenient option but carry a specific set of charges. Finance charges on cash advances typically start accruing immediately without a grace period, and the interest rates tend to be higher than those for regular purchases. For instance, the interest on a cash advance might be calculated based on a daily balance from the date of the advance, with a higher APR.

Fees in Addition to Interest Charges

It is important to note that finance charges are not the only fees that can be applicable. In addition to interest charges, there may be other fees such as late payment fees or fees for exceeding the credit limit. These additional fees can significantly impact the total amount of finance charges. For example, HDFC charges a late payment fee of Rs. 800/-, along with a 18% GST on the interest and late payment charges.

Example of Finance Charges Calculation

Let's consider an example. If the last bill statement amount is Rs. 10,000, and on the due date, a cardholder pays only Rs. 1,000. Assuming that the cardholder pays on the 4th day after the due date, HDFC charges 0.11836 on the outstanding amount of Rs. 9,000 for 24 days from the statement date. The amount would come to Rs. 255.66 in interest.
If there are any new transactions between the statement date and the payment date, the cardholder will be charged interest on each transaction per day, based on the outstanding balance. Additionally, the late payment fee of Rs. 800 and a 18% GST on the interest and late payment charges would also be applicable.

Note: The finance charges and other charges are subject to change at the discretion of HDFC Bank.

HDFC charges 43.2% per annum interest, which is 0.11836 on a daily basis as of 2023-24.