What is a penalty APR on a credit card?

A penalty APR is a higher interest rate — often 29.99% or above — that a card issuer can apply to your balance if you pay more than 60 days late. Federal law requires issuers to review the penalized account every six months and restore the regular rate if you've paid on time during that window.

Most credit card agreements list two or three different APRs: a purchase APR, sometimes a balance-transfer APR, and a penalty APR. The penalty rate is the ceiling — the highest rate the issuer is allowed to charge on your account — and it activates only under specific triggering conditions defined in your card agreement.

When a penalty APR is triggered

Payment more than 60 days late — this is the most common trigger and the one federal rules address directly. Under the Credit CARD Act, an issuer may impose the penalty rate if your payment is more than 60 days past due.
Returned payment — some card agreements also allow the penalty rate if a payment is returned for insufficient funds.
Exceeding your credit limit — less common since opt-in rules changed, but still listed in some older agreements.

How long the penalty APR lasts

Under the Credit CARD Act of 2009, if the penalty rate applies to existing balances, your issuer must review your account at least every six months. If you've made the minimum payment on time for six consecutive months during that review period, the issuer must restore the lower (pre-penalty) rate on your existing balance. New charges made after the penalty rate takes effect may continue to accrue at the penalty rate even after the review.

How to avoid and recover from a penalty APR

Set up autopay for at least the minimum payment — a 60-day late event requires missing two full billing cycles.
If you do miss a payment, contact your issuer immediately. First-time late payments often qualify for a one-time waiver.
Once triggered, make on-time minimum payments for six months to qualify for the mandatory rate review.
Check your card agreement (available at the CFPB's credit card agreement database) to see your card's exact penalty APR and trigger conditions.

What the rules say

The Credit CARD Act prohibits penalty rate increases on existing balances unless the cardholder is more than 60 days past due. — CFPB — Credit CARD Act Overview
Issuers must review the penalized account after six months of on-time payments and restore the lower rate to the existing balance if the consumer has paid on time. — CFPB — Penalty Rate Review Requirement
Card issuers must give 45 days' notice before increasing a cardholder's interest rate, with limited exceptions including the penalty rate after a 60-day delinquency. — CFPB — Credit Card Interest Rate Increases

Key takeaways

A penalty APR — often near 29.99% — can be applied to your balance if you pay more than 60 days late.
Federal law (Credit CARD Act) limits when penalty rates can be applied to existing balances.
After triggering, six consecutive on-time minimum payments should result in a mandatory rate review.
Autopay set to at least the minimum payment is the most reliable way to avoid this entirely.
Check your card agreement for your exact penalty APR — it's listed in the Schumer Box.

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