How Missed Credit Card Payments Can Trigger a Penalty APR Increase
Credit card issuers may raise the interest rate after a payment is more than 60 days late, using a penalty APR that must be disclosed in the card agreement.
A missed credit card payment does not automatically raise the interest rate, but if the delinquency exceeds 60 days, issuers are permitted to impose a penalty APR. This rate hike, which can add several percentage points, must be disclosed in the card's terms and the issuer must send a separate notice at least 45 days before it applies. The penalty APR can be applied retroactively to the existing balance, not just new charges, making repayment more costly.
Federal rules require the issuer to review the penalty rate at least every six months and to drop it after six consecutive on-time payments. Cardholders who anticipate difficulty should contact the issuer early to seek fee waivers, temporary rate reductions, or alternative repayment plans, and may also explore broader debt-relief options such as management plans or consolidation.
Why it matters
Understanding penalty APR rules helps borrowers avoid unexpected cost spikes and manage debt more effectively.
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