What is a penalty interest rate on a credit card?

A penalty interest rate on a credit card is an elevated rate of interest that may be charged on a credit card if the cardholder does not make their payments on time. In New York, this rate is typically set by the credit card issuer, and may be substantially higher than the standard rate of interest. For instance, a standard interest rate may be 18%, while a penalty rate may be set at 28%. Penalty interest rates are used as a incentive to ensure that consumers make their payments on time. Penalties may also be charged on the unpaid balance, as well as the interest rate being raised. Paying off the balance of a credit card account in full and on time is the best way to avoid the costly penalty interest rate. If a cardholder is caught in a situation where they cannot pay their full balance on time, they should contact the credit card issuer and ask for a payment plan that works better for their situation. Additionally, they may try to negotiate a lower interest rate with the issuer. In New York, it is important to be aware of the risks associated with penalty interest rates as well as the pertinent state credit card laws. Consumers should educate themselves and understand the terms and conditions of their particular credit card agreement. Understanding the laws can help consumers avoid costly charges imposed by penalty interest rates.

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What is a penalty interest rate on a credit card?

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