Penalty APR.

In plain English

A penalty APR is a raised interest rate a card issuer may apply when you trigger it, most often by paying late, and it can run far above your regular APR. Under the CARD Act, the issuer generally must give 45 days advance notice before raising your rate, and a rate increase can apply to an existing balance when a minimum payment runs more than 60 days past due. If the increase was triggered that way, the issuer must reinstate your old rate on that balance once you make six consecutive on-time minimum payments after the increase took effect, and issuers must also review increased rates at least every six months. The surest way to avoid a penalty APR is to never miss a payment, and if you do trigger one, getting back to on-time payments is the path back.

01Why it matters

A penalty APR can sharply raise the cost of a balance you already carry, so one or two missed payments can make digging out noticeably harder and slower.

02The math, step by step

Your card charges a regular rate, but after a missed payment the issuer applies a much higher penalty APR to your balance. On the same $2,000 balance, the higher rate adds noticeably more in interest each month, so more of your payment goes to interest and less to the balance until you earn the normal rate back. The exact penalty rate is set by your issuer and shown in your cardholder agreement.

03What this is NOT

04Receipts

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