What is a penalty APR on a credit card?
A penalty APR is a higher rate — often 29.99% or above — that an issuer can apply if you pay more than 60 days late. Federal law requires the issuer to review the account every six months and restore the regular rate after six on-time payments.
The penalty rate is the ceiling on your account and activates only under conditions spelled out in your agreement — most commonly a payment more than 60 days past due, sometimes a returned payment. Per the CFPB, if your rate increased because a payment was more than 60 days late, the issuer must reinstate your old rate once you've made six consecutive on-time minimum payments after the increase took effect — and separately, Regulation Z requires the issuer to review any rate increase at least every six months to see if a reduction is warranted. The defense is simple: autopay at least the minimum, since a 60-day trigger requires missing two full cycles, and call your issuer immediately if you do slip — first-time lates often qualify for a one-time waiver.
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