What is a penalty APR?

A penalty APR, or penalty Annual Percentage Rate, is a type of interest rate applied to credit card accounts in the state of Delaware. This type of rate applies if an account holder violates the terms of their agreement with the credit card company. For example, if a cardholder fails to make payments on time, charges over the credit limit, or otherwise breaks the terms of the agreement, the credit card company can apply a penalty APR to the account. The penalty APR is set by the credit card company, and it can be significantly higher than the normal interest rate charged on the account. Depending on the severity of the breach, the penalty APR could be as high as 30%, and the account holder would be required to pay interest based on this new rate. The penalty APR typically remains in effect for a minimum of six months, during which time the account holder will have to make payments at the higher interest rate. After six months, the credit card company may lower the penalty APR or remove it entirely if the account holder has demonstrated responsible financial behavior. In the state of Delaware, it is important to be aware of the penalty APR and the provisions in the credit card agreement so that you can avoid being hit with a higher interest rate. Responsible spending and payment habits can help ensure that you will not be subject to a penalty APR.

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