New Delhi, May 18 -- Credit cards are a commonly used payment tool that allows users to borrow money from a bank or card issuer up to a pre-approved limit. When used responsibly, they can offer convenience, fraud protection features and rewards, which may not be offered by most debit cards.

However, many people may not understand that credit cards offer an interest-free period only when the total outstanding amount is paid in full by the due date. Even a small unpaid amount can change how interest is applied on the balance carried forward, as well as on fresh transactions made using the card.

Interest charges increase the total outstanding amount on a credit card. Typically, banks levy interest under the following circumstances:

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