What is a penalty APR?
Penalty APR stands for Penalty Annual Percentage Rate and is the rate of interest charged on a credit card in the event of missed payments or other violations of the cardholder agreement. Penalty APR is usually much higher than the regular APR, and can make it more difficult to pay off the balance of a credit card. In Texas, credit card issuers are required by law to notify the cardholder of any change in APR of more than 5%. The cardholder must be given 45 days to make payments to avoid the penalty APR, otherwise, the penalty APR will be applied. Penalty APR can range from as low as 24% up to as high as 29.99%, making it much more expensive to pay back the credit card balance. Additionally, in Texas, once the penalty APR is applied, it stays in effect as long as the cardholder has the card account open, unless the credit card company states otherwise in the cardholder agreement.
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