What are interest charges?

The cost of borrowing money from a lender, calculated using APR (annual percentage rate). When a cardholder makes a purchase with a credit card, the card issuer pays the merchant, and then the cardholder pays back the card issuer the amount of the purchase plus any interest charges. If a credit card has a grace period, and the cardholder pays the entire outstanding balance back, no interest charges are assessed. If the outstanding balance is not paid in full--or the credit card does not have a grace period--interest charges will be assessed on credit card purchases.