What credit card interest is
A credit card is a revolving loan. The bank pays the merchant, and you owe the bank. In Pakistan, banks usually call the interest markup. It is the price you pay for carrying a balance past the due date.
Card markup is quoted as a yearly rate but charged on your balance over shorter periods, often calculated on the daily balance. Unpaid markup joins the balance, and the next period's markup is charged on it too. That is compounding. See Compound Interest and APR and Effective Rate for why the effective cost is higher than the quoted rate.
Ready to try it on a real or demo account?
Partner link · trading carries a high risk of loss
How the grace period works
The credit card grace period is the time between your statement date and your payment due date. If you pay the full statement balance by the due date, purchases on that statement usually carry no markup.
The grace period has conditions:
- It applies only to full payment. Under many card terms, if you pay part of the balance, markup is charged on the whole amount, often from each transaction date, not just on the unpaid part.
- It can be lost for new purchases. While a balance is carried, new purchases may start accruing markup immediately until the balance is cleared.
- Cash advances usually have no grace period. Cash withdrawals with a card typically accrue markup from the day of withdrawal and often carry a separate fee.
The exact rules differ by bank and card. Read your card's key fact statement and terms. Do not rely on a general description.
The minimum payment trap
Each statement shows a minimum amount due. It is usually a small share of the balance plus any fees and markup. Paying it keeps your account in good standing and avoids a late fee. It does not make the debt cheap.
What happens when you pay only the minimum:
- Most of the payment covers markup and charges. Only a small part reduces the balance.
- New markup is charged on a balance that barely falls.
- Any new spending is added on top, so the balance can grow even while you pay every month.
- The total markup paid can become larger than the original purchases.
To see the effect, enter your balance, the card's yearly rate from your statement, and a fixed monthly payment in the calculator below. Compare a small payment with a larger one and look at total interest and the length of the schedule.
Fill in the empty fields to see the result.
| Year | Paid | Interest paid | Balance |
|---|
Annuity: A = P × i / (1 − (1 + i)^−n), i = annual rate / 12. Declining: P / n of principal + interest on the remaining balance. Fees and insurance are not included.
The calculator models a fixed loan, so treat the result as an estimate. A real card balance changes with new spending, fees and the bank's calculation method.
Credit card charges to check
Markup is only one cost. Common credit card charges include:
| Charge | What it is |
|---|---|
| Markup on carried balance | Charged when the statement is not paid in full |
| Cash advance fee | Charged on cash withdrawals, in addition to markup |
| Late payment fee | Charged when the minimum is not paid by the due date |
| Over-limit fee | Charged by some banks when spending exceeds the limit |
| Annual or renewal fee | Charged for keeping the card, sometimes waived on conditions |
| Foreign transaction charge | Charged on purchases in other currencies, plus the conversion rate |
Each bank publishes a schedule of charges. Read it before you rely on any figure, because rates and fees change.
Credit card markup in Pakistan and the policy rate
Bank lending rates in Pakistan move with the State Bank of Pakistan policy rate over time, though each bank sets its own card rate. The latest decision on record here is: SBP policy rate raised by 50 bps to 12% with effect from 27.10.2026 (MPC). For background, see SBP rates and economy.
Islamic banks offer card products built on different contracts and charging structures. See Payments, tax, Islamic banking and Islamic finance.
Practical ways to limit the cost
- Pay the full statement balance by the due date whenever you can.
- If you carry a balance, pay well above the minimum and stop new spending on that card.
- Avoid cash advances.
- Set a reminder or automatic payment before the due date.
- Keep an emergency fund so a surprise expense does not go on the card.
- Late or missed payments can affect your credit score. Card limits and balances also count in your debt-to-income ratio.
Card debt and trading
Do not use borrowed money from a card to fund trading. Leveraged CFD and forex trading can lose money fast, and you would still owe the markup. Also note that per the SBP, remitting foreign exchange to overseas forex/margin/CFD platforms is not allowed through any payment channel (FERA s.5(1)). See Law and regulators.
For more on borrowing, read How Loans Work, Effective Loan Rate and Debt Traps.
Frequent questions
Is there interest if I pay the full statement balance?
Under typical card terms, no markup is charged on purchases if the full statement balance is paid by the due date. Check your card's terms to confirm.
Why was I charged markup after a partial payment?
Many cards charge markup on the whole balance, often from transaction dates, once the full amount is not paid. Your card terms state the method.
Does paying the minimum protect me?
It avoids a late fee and keeps the account current. Markup still accrues on the remaining balance.
Do cash withdrawals get a grace period?
Usually not. Cash advances often accrue markup from the withdrawal day and carry a separate fee.
Where do I find my card's rate and fees?
On your statement, the key fact statement and the bank's published schedule of charges.