Did you ever experience paying your credit card late only to see an uncontrollable skyrocketing interest rate? Just so you know, this is what you call a penalty APR. It can hurt both your credit as well as your ability to make on-time payments for your debt.
What is Credit Card Penalty APR?
The penalty annual percentage rate or APR is the interest rate that credit card issuers charge on cardholders with late payments. There are issuing companies that offer their customers with a grace period, often two days, for clearing the bill prior to calculating the higher interest charge.
The issuer determines the penalty APR for the customers who are late for more than 60 days on clearing their remaining balance. It is the responsibility of the issuer to let the user know in writing about 45 days prior to charging the higher APR rate.
The said conditions took effect after the passing of the Credit Card Act of 2009 that protects the consumers’ interest and puts a limit on the penalty fees.
How to Avoid Penalty APR?
Many credit card issuers get rid of the card’s penalty APR after making on-time payments for six months. But, it would be so much better if there is no need for you to pay penalty APR rates in the first place. The rate of interest is high at 29.99%. Good news because there are several things you can do to save yourself from having to pay the penalty APR.
- Negotiate with the lender.
It is definitely the first step you have to consider. In case you think that you will have a late payment on your card, you might want to get in touch with them to see if it is possible to reach a compromise. Most issuers will extend the payment’s due date or lower the penalties to help out their clients.
- Review the credit card agreement.
Don’t forget to go through your credit card agreement then understand all policies regarding late payments. The mandatory disclosures always have a particular section detailing how much the penalty APR is going to be and how missed payments will trigger it. If you understand what triggers the penalty APR, you will have a better management of your card and prevent penalties.
- Manages your balances.
One more method for preventing late payments is checking all of your credit card statements and paying them right away. You could list down monthly statements for each card and review them upon receiving the statement.
- Maintain low credit card balances.
It can be very tempting to get carried away with using your credit card as it lets you spend money you don’t really have. However, it is important to be responsible with your credit card since you need to pay back that balance later. Make sure you try keeping your credit balance low and charge to it only those costs that you can pay for on a given time.