Credit cards are a great way to build up your credit score, as long as you are responsible and make payments on time. If you do miss your payments and get behind, you may have to pay a penalty APR.

If you would like to learn more about penalty APRs, read on to find out. You will also learn how they may pose a financial challenge for cardholders.

Table of Contents

Penalty APR Basics

Credit cards come with an APR range. If you have a good credit score, your APR will be lower in that range. If you make the minimum payment on your credit card bill each time, then you will most likely stick with the baseline APR, which is the one you start out with. If you always pay in full, you will not need to worry about a penalty APR on your card.

However, if at any time you are more than 60 days late on making a minimum payment, your credit card company will most likely change you to the penalty APR. The penalty APR is in your disclosures that came with the card.

The credit card company will notify you if they will apply the penalty APR to your balance, so you will know if anything changes.

Why Penalty APRs Are a Big Deal

Some people miss making the minimum payment on their credit card bills, because they cannot pay it or forget. It’s a good idea to be sure to at least keep up with the minimum payment so you can avoid a penalty APR. This is because the penalty APR can be up to two times as high as the normal APR.

Another reason you want to try avoiding the penalty APR is that the higher APR doesn’t just go away after the first minimum payment after getting the new rate. Your credit card company can impose the penalty APR for up to six months. Once you make six on-time payments in a row, the company must review your rate. Until then, the credit card company can charge you the higher APR.

Additionally, the penalty APR applies to your future balance going forward not just the period when it started. This will occur until your credit card company moves you back to the regular APR.

If you feel that you are back on track to making your minimum payments before the six-payments mark, you can call your credit card company to review your case. It may not work but is worth a shot. You may also consider a zero-APR credit card, like this one.

Bottom Line

Penalty APRs are no joke and you certainly don’t want to be stuck with one. They can last be very high and last for a longer time than you think. It’s best to make sure you are paying your minimum payments on time, unless you want to pay an APR that may be double your normal rate!

For more information on banking, check out the rest of our bank guides right here on HMB!