What is a penalty APR on a credit card?

Question

ClearValue Editorial Team · Accepted Answer

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. Under the Credit CARD Act of 2009, if the penalty rate is applied to an existing balance, the issuer must review the account at least every six months and restore the lower pre-penalty rate on that balance once you've made six consecutive on-time minimum payments. New charges made after the penalty rate takes effect may keep accruing at the penalty rate even after that review. 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.