A cure for penalty rates by issuers

Sunday, October 3rd, 2010
Updated: October 3rd, 2010
The content is accurate at the time of publication and is subject to change.

At some point in time, most customers would have faced a situation of having missed a credit card payment. It could have occurred due to simple oversight, or due to the misplacement of a bill, or the fact that the person concerned was travelling and hence unavailable to pay off the bill. Paying a bill late once in a while is alright. But if one gets into the habit of missing more than one payment on more than one occasion, then the card holder would see a sharp rise in the APR`s or the penalty rates.

With the new credit card rule in effect, it is possible to get one`s account back into its original interest rates and “cure” the penalty blues. As per the new provisions made by the credit card accountability, responsibility and disclosure act (2009) the issuers are expected to review the interest rates and restore the penalty rates to the original rates after six consecutive payments are made on time.

When the customer defaults two billing cycles, then the penalty APR comes into place and this can be reverted to the original rates only after 6 on-time payments consecutively (at the higher APR). This is done automatically and without any request from the customer.

However, this new rule is applicable only on the existing balance that has been overdue for more than 60 days. This would not be applicable on fresh purchases. As per the CARD act, an increase in interest rate or the new rate can come into effect after a 45-day notice period. If the card holder satisfies the requirements by making 6 on-time payments and is still left with some balance, then the pre-penalty rates have to be charged on the remaining balance but new purchases can attract fresh charges.

Most credit cards these days are variable rate cards (APR could fluctuate with the prime rate). If there is a change in prime rate during the 6-month period (while making payments on time) then the “cure” rate would vary from the pre-penalty rate.

This change brought about by the new regulation will not help cardholders who have shaky credit and the ones who are in a permanent “debt traps” since the requirements of six on-time payments would not be met. It is a small step and has limitations, as in spite of this provision customers will be paying higher rates for some period will remain in debt. There are no limitations on penalty rates as that would remain under the discretion of the companies. Even if card holders clear off payments within the six on-time payments, they will not see a break in their interest rates.

All rates and fees, and other terms and conditions of the products mentioned in this article/post are actual as of the last update date but are subject to change. See the current products' Terms & Conditions on the issuing banks' websites.

Latest Credit Card Issuers News

Monday, March 4th, 2024

The news that Capital One Financial has struck a deal to buy Discover Financial Services shook up the credit card market, paving the way for Capital One to become the largest nation’s credit card issuer in the country. Capital One, a stalwart in the financial sector and the ninth-largest bank in the U.S., plans to […]

Wednesday, March 29th, 2023

Citi has officially launched its new travel platform with the assistance of Booking.com, which Citi cardholders can use for earning and redeeming Citi ThankYou points. Citi Travel with Booking.com will replace the existing City Thank You Travel Center and will offer access to over 1.4 million hotel and resort options, as well as competitive pricing […]

Wednesday, September 14th, 2022

An alliance between American Express and i2c is now focused on offering payment products in the American Express network through fintech companies. Amex announced its collaboration with payment and banking technology company i2c in April this year. The two partnered to create a platform that allows fintechs and financial institutions to launch cards more quickly […]

Wednesday, June 2nd, 2021

Continuing to live in the present reality and the ongoing COVID-19 pandemic, global giants of the financial and credit sector introduce new bonuses for the convenience of their customers. Mastercard, in turn, has announced new partnerships with DoorDash and HelloFresh offering new food and grocery delivery perks to Mastercard World and World Elite cardholders. According […]

Thursday, January 21st, 2021

Walgreens has recently announced its plans to enter the consumer financial services market. To be precise, the second-largest pharmacy store chain in the United States is going to start issuing credit cards and prepaid debit cards under its brand. The main reason for this expansion of the scope of activity is the losses incurred by […]

Best Credit Offer
Surge® Platinum Mastercard®
Check off the cards you want to compare. Then click the Compare link to go to the comparison table.
Consumer Rating: 4 / 5
Horizon Card Services Group One Freedom Card
Copyright © 2001-2024 BestCreditOffers.com All Rights Reserved.

See the credit card's terms and conditions on the online application page. Note that this website may be compensated by credit card issuers when the visitor applies for a card through the links on this website. We do our best to maintain all information accurate and up to date. However, we do not warrant the credit card information won't change. Click the "Apply Online" button and review the current info on the secure credit card terms page.

Information in these articles is brought to you by BestCreditOffers.com. Banks, issuers, and credit card companies mentioned in the articles do not endorse or guarantee, and are not responsible for, the contents of the articles.

The BestCreditOffers.com webpage is a free service and an information resource for credit cards and financial products and services available to eligible United States consumers. BestCreditOffers.com does not offer any warranties and is not a direct service. There are no guarantees for approval or offers when applying for a credit card. Please refer to the application if you would like more information on each credit card. When you click "Apply" for a particular credit card, please take the time to review the terms and conditions of the product/service at the issuer's website. All logos on the BestCreditOffers.com website are property of their respective owners.

Disclaimer: This editorial content is not provided or commissioned by the credit card issuer. Opinions expressed here are the author's alone, not those of the credit card issuer, and have not been reviewed, approved or otherwise endorsed by the credit card issuer. Reasonable efforts are made to present accurate info, however all info is presented without warranty. Consult a card's issuing bank for terms & conditions.

BestCreditOffers.com makes every effort to keep information up to date and accurate. However, the information regularly changes and is presented without warranty. Therefore, we strongly recommend all our readers to visit the credit card application page by clicking "Apply Online!" button to review the detailed credit card's terms and conditions. Note that BestCreditOffers.com may be compensated by the credit card issuers when the readers apply for a credit card through this site.

BestCreditOffers.com is an independent, advertising-supported website which receives compensation from the credit card issuers and companies whose offers appear on the site. Compensation may impact how and where products appear on our site, including, for example, the order in which they may appear on the site pages. BestCreditOffers.com does not review or list all available financial or credit offers.

You've successfully subscribed!

Please specify the following:All these fields are optional

Thank you for providing this information! We will make sure our letters are useful for You.

User Generated Content Disclaimer: These responses are not provided or commissioned by the bank advertiser. Responses have not been reviewed, approved or otherwise endorsed by the bank advertiser. It is not the bank advertiser's responsibility to ensure all posts and/or questions are answered.