What is a penalty APR?

A penalty APR is a higher interest rate that is charged to a credit card holder when they default on their card agreement or have failed to make payments on time. This penalty rate is usually significantly higher than the standard rate offered by the credit card company. In Nevada, credit card issuers must follow the Truth in Lending Act, or TILA. Under TILA, credit card companies must disclose the penalty APR rate to the cardholder prior to issuing a card, or if the penalty APR rate is changed. The penalty APR rate must be reasonable and may not exceed the maximum rate allowed under state law. Additionally, issuers cannot charge a penalty APR rate on a balance that was made in full within the last six months or on any promotional rate balance. Penalty APRs can have long-term consequences, as they will remain in effect until the amount due has been paid in full or the cardholder has made six consecutive payments on time. For this reason, it is important for cardholders to pay their bills on time to avoid being charged a penalty APR.

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What is a penalty APR?

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