How cash credit interest works

Cash credit interest is commonly calculated on the daily utilised balance rather than the sanctioned limit. Actual account terms may include minimum charges, penal interest, compounding and different day-count conventions.

Related searches: cash credit interest rate calculator, cash credit limit interest calculator and cash credit account interest calculation. This tool uses illustrative daily utilisation rather than the full sanctioned limit.

Formula

Illustrative simple interest = daily outstanding × annual rate × number of days ÷ (365 × 100). For changing balances, calculate interest separately for each period and add the results.

Worked example

Suppose ₹20 lakh remains outstanding for 10 days and ₹35 lakh for the next 20 days at an illustrative annual rate of 11%. Using a 365-day basis, total simple interest is approximately ₹27,123.29. The example excludes fees, penalties and taxes.

Understand the drawing power

The available amount may be restricted by drawing power computed from eligible stocks and receivables after margins and other deductions. A sanctioned limit does not necessarily equal the amount that can be drawn.

Important checks

Check the bank’s applicable rate, day-count convention, posting frequency, overdue or irregularity charges and the actual daily balance. This calculator is educational and does not reproduce any particular bank’s account statement.

Interactive interest calculator

Enter up to two balance periods. The result uses simple interest on a 365-day basis.