Can a creditor increase your interest rate after a missed payment?
Summary
Credit card companies can raise your interest rate if you miss payments for more than 60 days, using a rule called a penalty APR. This higher rate can apply to your existing balance and stays until you make six on-time payments in a row. Card issuers must tell you about any rate increases before they happen.Key Facts
- Missing a credit card payment by more than 60 days can lead to a higher interest rate called a penalty APR.
- The penalty APR can increase your interest rate by several points above the original rate.
- Credit card companies must tell you about the penalty APR in the card’s terms before you open the account.
- They must also send a notice at least 45 days before raising your rate.
- The penalty APR can apply to your current balance, not just new charges.
- The higher interest rate is not permanent; it must be reviewed and can be removed after six consecutive on-time payments.
- A late payment under 60 days usually leads to late fees, not an increased interest rate.
- If you struggle to pay, contacting your card issuer early may help, as they sometimes offer programs to reduce rates or fees temporarily.
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