Beware of Higher APRs If Credit Card Payments Are Delayed
Late credit card payments obviously lead to late fees and lower your credit score, but there is another reason to avoid late payments: higher interest rates.
Your card’s terms of use usually allow them to raise your annual interest rate if you are late with your payment. This is called Penalty APR, and Bankrate uses an American Express card as an example:
The variable annual interest rate on the American Express Blue Cash Preferred card currently ranges from 13.24% per annum to 22.24% per annum. But if you receive a penalty at an annual rate, you will pay 29.49% per annum for any new transactions.
The company states that an annual penalty will apply if you are late in making one or more payments, or if the payment is refunded. American Express says it will charge a penalty for a minimum of 6 months and will maintain that rate “until you make timely, no-refund payments within a verified 6 months.”
As Bankrate points out, not all issuers determine exactly how long they will punish you. Some simply say that the annual interest rate will “apply indefinitely.” No one is going to pay their credit cards late, of course, but this is something to be aware of if you ever find yourself in such a situation, and this is another good reason to make sure your payments are on time. For more details, navigate to Bankrate’s full post at the link below.
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