Credit Card Borrowers Can Expect Penalty Rate of 28.45% If 60 Days Late With Payments

A new survey pegs the average penalty interest rate at 28.45 percent for credit card borrowers who fall behind in payments by 60 days or more, according to’s survey of major 100 U.S. credit cards.

That’s down slightly from a 28.60 percent average penalty APR in 2012, but still very high. offers this example: A cardholder who carries a $4,000 balance on a card charging 11.82 percent — the average APR for those carrying a balance, according to the Federal Reserve. At the 28.45 percent average penalty rate, the cardholder would have to pay an extra $665.20 in interest a year.
However, the number of issuers using penalty interest rates has decreased dramatically since the 2009 Credit CARD Act limited penalty fees and set rules on penalty rates — including a way for consumers to get out of them.
Despite new credit card laws requiring more clarity of terms, consumers often can’t find out what the penalty rates are from their credit card issuer. Federal law requires penalty rates to be disclosed on monthly statements, not before signing up.
Most issuers don’t disclose the penalty upfront. Only 23 cards disclose penalty rate information in the card’s publicly available terms and conditions document. The other 77 cards required follow-up phone calls or review of cardholder agreements filed in a federal database to confirm penalty rate details.
In 2010, 91 percent of issuers imposed penalty rates. By 2012, the number had fallen to 69 percent. This year, it was just 60 percent.
Other highlights from’s survey:
• Sixty of 100 surveyed cards have a penalty interest rate of some kind: 28 have penalty APRs based on the prime rate plus a specified percent, 32 calculate a cardholder’s penalty APR based on creditworthiness. Rates based on the prime rate can move up automatically when that index rises, as it is expected to in 2015.
• Almost all issuers of consumer credit cards charge a penalty fee at or near the maximum allowed by federal law. The maximum fee for repeat late payments was capped by law at $35 until January 2014, when it was inflation-adjusted upward to $37. The 87 consumer cards in our survey averaged $34.63, with 70 charging $35, two charging $36 and 10 charging $37. The remaining five charged $25 or less.
• The CARD Act requires lenders to revoke the penalty rate if consumers make six consecutive on-time payments, but just 38 of the 60 cards make that clear in their publicly available documents. Another 18 say penalty rates “may apply indefinitely” and give no further information in publicly available documents.

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