Updated: Jul 16, 2024

What is a Credit Card Penalty APR?

Learn all about credit card penalty APRs, which may apply to accounts that have a missed payment for an extended period of time.
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Many Americans have credit cards. They’re an easy way to pay for purchases and let you avoid carrying huge quantities of cash around.

Credit cards also offer perks like cash back or travel rewards and consumer protections like extended warranties.

Of course, credit cards have their drawbacks.

While you can use a card to buy something now and pay it off later, they aren’t like getting free money.

You have to pay interest when you use your credit card and don’t pay your balance in full at the end of the statement period.

Credit cards state their interest rate, called an Annual Percentage Rate (APR), so you know ahead of time how much interest you’ll pay if you decide to carry a balance.

Most credit cards also have a Penalty APR, which is higher than the standard APR.

What is a Penalty APR?

The penalty APR is a higher interest rate that may apply (and becomes your regular APR) if you make a late payment -- typically when made 60 or more days late -- or have a payment that is returned. Usually, the penalty APR can be as high as 29.99%.


When you get your credit card bill, it includes the minimum payment that you must make and the due date for that payment.

If you make the minimum payment by the due date, you’re good to go.

But, if you don’t make your payment by the due date, bad things start to happen.

  1. You may be charged a late payment fee
  2. The penalty APR begins to apply going forward
  3. A missed payment for an extended period (usually 60 days) means a big drop in your credit score

The end result is that you're paying a lot in fees and it would be very expensive to hold a balance on your credit card (you'll be paying significantly in interest charges).

More so, the lowered credit score can affect your ability to qualify for loans in the near future. And, even if you do qualify, you might not get approved for the lowest rates -- for a large loan like a mortgage, this could mean thousands of extra dollars on interest.

Not every credit card charges a penalty APR, so you should check if yours do.

You should be able to find this information in the terms and conditions or cardholder agreement.

How to Avoid It

To avoid getting hit with the penalty APR, it's very straightforward.

Make the minimum payment every month

The easiest way to avoid paying a penalty APR is to make your minimum payment every single month. If you never miss a payment, then your card issuer won’t penalize you.

If you get a lot of bills every month, it can be easy to forget about a credit card bill here and there.

If you’re worried about missing a bill, try setting up automatic payments.

This authorizes your card issuer to withdraw a payment from your checking account every month.

Even if you only set up an automatic payment for the minimum amount due and plan to pay a larger amount each month manually, the automatic payment will save you from forgetting about the bill.

Credit cards without penalty APRs

If you’re really worried about incurring a penalty APR, you can try to choose credit cards that either don’t charge penalty APRs or forgive one or two late payments. 

How to Reduce Your Penalty APR

If you incur your credit cards penalty APR, it is possible to get the interest rate reduced.

However, it might take some time.

Rebuild a solid track record

The most important step toward reducing your penalty APR is to start making payments as soon as you can.

Make sure you make payments for any bills that you missed and keep making payments before the due date for every bill that comes in.

Ask for an APR reduction

After you’ve built up a few months of timely payments, you can try reaching out to the card issuer.

Call the number on the back of your credit card and ask the representative if they can reduce your interest rate based on your improved payment history.

Be polite and see if the representative can help you. If they say no, ask whether they have any insight into when you should call back and ask again or if the APR will be reduced automatically.

Transfer your balance

If there’s no chance of getting the penalty APR reduced in the short-term, you can also try transferring your card’s balance to another credit card.

Once you zero out the balance on the card with a penalty APR, you won’t pay any interest based on the card’s rate. Just make sure that you make your monthly payments on the credit card you transferred the balance to.

Also, remember that balance transfers usually incur a fee.

You might pay a few percent of the balance transferred. If you can pay the balance of relatively quickly, you might be better off leaving the balance on the card with a penalty APR and diverting extra cash toward paying it off.

Other Tips

Here are some other tips related to penalty APRs.

Don’t use your card if it’s charging the penalty APR

If one of your credit cards is charging its penalty APR, you should do your best to stop using it as soon as you can.

Start using your debit card, pay with cash, or use a different credit card if you have one.

As long as the penalty APR is active, you’ll have to pay the higher interest rate.

You should focus on paying down your card’s balance instead of adding to it by making new purchases.

Set up automatic payments

It can’t be stressed enough that the best way to avoid penalty APRs is making sure that you never miss a payment. Automatic payments are the best way to do this.

The first thing that you do when you get a new credit card is to set up automatic payments.

Even if the payment is just for the minimum amount due, it’ll save you from ever missing a payment.

That’s good for your credit and means you’ll never pay a penalty APR.


Penalty APRs are higher interest rates that you need to pay if you start missing payments on your credit card.

Nobody likes paying interest, so you should do your best to avoid them.

The good news is that you’ll never have to worry about penalty APRs if you use your credit card well and make your payments every month.