Is it important to be on time in making credit card payment? If this is your matter of concern also then you must know not paying bills on time will be troublesome for you. So, be mindful while handling the credit card as penalty APR could be the ultimate challenge that you might have to face.

Interest rate that is levied on the transactions and purchases that you make constitutes credit card APR. So, a penalty APR is counted to be higher than normal rates whenever any of the credit card terms and services is violated. The result is that more interest is charged on future purchases made by you. On top of this, if you fail to activate the account then penalty APR is imposed on the account balance also.

Penalty APR can bring harm to your financial budget. But the good news is that this can be avoided. So, in order to avoid getting trapped in such an unwanted situation, you must know what a penalty APR is and for what reasons this is charged from you. Get the complete picture here in this article.

How a penalty APR works?

If you are a credit card user then you must know that it carries an APR which is the annual percentage rate. So, APR is the interest rate that you pay as charges for using this card. The least minimum payment toward the balance should be paid by you duly every month although you can pay more.

Now, the question is when the penalty APR is generally charged. Whenever there is a violation of credit terms and services, a penalty APR is charged. So, basically if you fail to make a credit card payment more than 60 days or consistently delay payment every month then a penalty APR will be charged.

In some cases, the credit card company might get ready to allow some grace period within which the payment should be made. This could be a couple of days within which the company completes the calculation of the highest interest charge. In general, penalty APR is charged at 29.99% and could be less depending on the type of credit card.

It is mandatory for the credit card issuer to notify the user about the increased APR rate. The information should be shared in writing. Lastly, the user should get the notification at least 45 days ahead of levying the charges. to gain some additional knowledge in this regard.

You will get all the information related to penalty APR in the loan agreement. For additional query you can also approach the credit card company. Prevent dire consequences following late payments by gaining an in-depth knowledge on this matter.

How long does a penalty APR lasts?

Once six months are over, the credit card company is bound to lower the rate on your outstanding balance. The rates are meant to come back to normal according to . But this does not mean that you are relieved from penalty APR as this will continue to be charged on your future purchases.

There might be some companies who could be more lenient towards users like you. As a benefit you will be relieved from penalty APR on future purchases. But such a gesture cannot be assured from the credit card issuing company.

The ideal way to get rid of a penalty APR is by paying off the credit bill without any delay. It is because penalty APR will continue to be charged by the credit card provider for a longer period when payments are late. You will be able to remove the penalty APR by making six consecutive payments either before or on the due date.

You should try to pay off the minimum required amount or else all your efforts will go in vain. Paying less than the needed minimum amount will be recorded as missed payments in the accounts. Moreover, if your payment is rejected due to bounced check then the whole situation will go against you.

In some cases, the card issuer might give you relaxation from penalty APR. This will be clearly mentioned in the loan agreement. However, if it is not mentioned in the agreement then this means that the card issuer will charge a penalty APR and you cannot get it removed simply by asking for a favor from the card issuer.

It does not matter if you are an existing long time customer or you have a perfect credit profile. The penalty APR can be removed only by making payments on time. Also, you must note that the penalty APR will have a negative impact on you financially and can affect your borrowing potential.

The duration for penalty APR would vary depending on the amount of debt you owe when the penalty was charged. Also, it varies based on the amount of extra debt that you take out after the penalty has been levied on you. Rates will come back to normal if you clear off the debt on time and as per the agreement.

Make sure not to take additional debt when you are already paying for the penalty. This will force the card issuer to extend the penalty for an indefinite time period. You will have to pay for high penalty rate when you borrow money after the penalty APR comes into effect.

Are there ways to avoid the penalty APR?

Yes, of course there are ways you can avoid the penalty APR. Go through the below mentioned tips and keep them in mind carefully.

  • If you think that you will be late in paying then approaching the card issuer would be first thing you should do.
  • The easiest way you can prevent such charges is by reading the credit card agreement carefully so that you can clearly understand the late payment policies.
  • Another way is by paying attention to all the credit card statements that you receive so that you can pay off the balance on the spot and without any delay.
  • Try to keep the balance on the credit card as low as possible.
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