Penalty APR Explained: What Triggers It and How to Get It Removed

Independent guide - not affiliated with or endorsed by any card issuer. Terms differ by card; your card agreement and your issuer's own website have the final word on your account.

A penalty APR is a higher interest rate a card issuer can apply after you break certain account terms, most commonly by paying late. Federal rules limit when it can hit your existing balance: generally only after your minimum payment is more than 60 days late. You must get at least 45 days' notice, and if you then make six consecutive on-time minimum payments, the issuer must lower the rate on that balance again.

This guide explains what triggers a penalty rate, how the protections in Regulation Z work, and what to do if you have been hit with one.

Where to find your card's penalty APR

Look at the rate and fee table in your card agreement, often called the Schumer box. If your card has a penalty rate, it is listed there with the events that can trigger it and how long it may last. Some cards have no penalty APR at all, which is worth checking before you apply. Our Schumer box guide shows where each item sits.

What triggers a penalty APR

Each issuer sets its own triggers in the agreement, and they are usually some combination of:

• A late payment.
• A returned payment, for example a bounced check or a failed bank transfer.
• Going over the credit limit, on cards whose terms allow it.

Whether a trigger can raise the rate on money you already owe, or only on new purchases, is where the federal rules matter.

Existing balances: the 60-day rule

Regulation Z generally prohibits issuers from raising the rate on an existing balance. One of the exceptions is delinquency: under 12 CFR 1026.55(b)(4), the issuer may apply an increased rate to the existing balance when it has not received your required minimum payment within 60 days after its due date. A payment that is a few days or a few weeks late cannot, on its own, push a penalty rate onto the balance you already have.

That does not mean a shorter delay is free. Even before 60 days, a late payment can bring a late fee, can be reported to the credit bureaus once it is 30 days late, and, after proper notice, can lead to a higher rate on new transactions. Our guide to what happens if you miss a credit card payment walks through each stage.

The 45-day notice

Before a penalty or delinquency rate takes effect, the issuer must send written notice at least 45 days in advance (12 CFR 1026.9). The notice explains that the penalty rate has been triggered, when it starts, which balances it applies to and the main reasons. When the increase is based on a payment more than 60 days late, the notice must also tell you that the increase will stop applying if you make six consecutive minimum payments on time.

Use those 45 days. Bring the account current, set up automatic payments, and call the issuer to ask whether it will waive or reduce the increase. Issuers are not required to agree, but a long on-time history helps.

How to get the penalty APR removed

For an increase applied because a payment was more than 60 days late, Regulation Z sets a cure. If the issuer receives six consecutive required minimum payments on or before their due dates, starting with the first payment due after the increase takes effect, it must reduce the rate on the affected balance back to the earlier rate (12 CFR 1026.55(b)(4)(ii)). The cure covers transactions made before, or within 14 days after, the notice.

Separately, when an issuer raises a rate based on your credit risk or similar factors, it must review that increase at least once every six months (12 CFR 1026.59) and lower the rate if the review shows it is appropriate.

Practical steps:

1. Pay at least the minimum, on time, six months in a row. Automatic payment is the simplest way.
2. Keep the notice and note the date of each payment.
3. After the sixth payment, check your statement. If the rate has not come down, contact the issuer and point to the notice.
4. If the issuer still does not fix it, you can submit a complaint to the CFPB.

Should you move the balance?

If a penalty rate leaves you with a large, expensive balance, a balance transfer to a card with a 0% introductory rate can help, if you qualify after the late payment. Weigh the transfer fee against the interest you would save; our guides to the balance transfer fee and how to do a balance transfer show how to compare. For a rate overview, see how credit card APR works.

The short version

A penalty APR is the price of paying late. For balances you already owe, it generally needs a payment more than 60 days late and 45 days' notice, and six on-time payments in a row bring the rate back down. The cheapest fix is never to reach that point: automatic minimum payments keep you clear of it entirely.