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What is a penalty APR—and how to avoid it

Penalty APRs can make it difficult to pay off your credit card debt. Select reviews what a penalty APR is, how to avoid it and credit cards that have no penalty APRs.

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Select’s editorial team works independently to review financial products and write articles we think our readers will find useful. We earn a commission from affiliate partners on many offers, but not all offers on Select are from affiliate partners.

Credit cards have multiple APRs for different kinds of borrowing. Most common is the purchase APR, which is the interest you are charged for balances you incur from everyday spending. 

But card issuers frequently establish unique APRs for balance transfers and cash advances too. This can make it hard to keep track of what interest rate you're being charged at any given time.

One of the highest APRs you may notice on your credit card agreement is your penalty APR, which is an increase in your interest rate when you miss a payment or a payment is returned.

Penalty APRs are exactly what they sound like — a penalty for doing something wrong. But they can be completely avoidable if you take certain actions.

Below, Select reviews what a penalty APR is, how to avoid a penalty APR and credit cards that have no penalty APRs.

What is a penalty APR?

When you pay your credit card bill more than 60 days late, card issuers may penalize you with an interest rate that's significantly higher than your regular APR. 

For instance, the Chase Sapphire Preferred has a 16.24% - 23.24% variable APR (based on credit worthiness), but the penalty APR is a variable up to 29.99%.

How long does a penalty APR last?

Penalty APRs last for at least six months, but can be longer if you continue to make late payments.

The terms for the Citi® Double Cash Card state that the "penalty APR may apply indefinitely."

However, if you make consecutive on-time payments for six months, card issuers are required under the CARD Act to revert the APR on your outstanding balance back to the regular APR. But they can still keep the higher penalty APR for new purchases.

Terms for the Blue Cash Preferred® Card from American Express state: "If the penalty APR is applied, it will apply for at least six months. We review your account every six months after the penalty APR is applied. The penalty APR will continue to apply until after you have made timely payments, with no returned payments during the six months being reviewed."

How to avoid a penalty APR

The simplest way to avoid a penalty APR is to pay your bill on time. This can easily be done by setting up autopay so you don't have to worry about it. Select recommends setting up autopay for at least the minimum due, but it's best to pay the full balance and avoid paying interest entirely.

You can also opt to set reminders on your phone and through your card issuer to ensure timely payments. But remember — you can also trigger penalty APRs when a payment is returned. Maintaining a sufficient balance in your checking account (and monitoring it regularly) is essential in avoiding penalty APR.

If you have a history of missing credit card payments, consider opting for one of the credit cards below that have no penalty APR.

Credit cards that have no penalty APR

Credit cards that have no penalty APRs are hard to find, so we've done the work for you and rounded up some options.

Citi Simplicity® Card

On Citi's secure site
  • Rewards

    None

  • Welcome bonus

    None

  • Annual fee

    $0

  • Intro APR

    0% for 21 months on balance transfers; 0% for 12 months on purchases

  • Regular APR

    15.49% - 25.49% variable

  • Balance transfer fee

    5% of each balance transfer; $5 minimum

  • Foreign transaction fee

    3%

  • Credit needed

    Excellent/Good

Terms apply.

Apple Card

Information about the Apple Card has been collected independently by CNBC and has not been reviewed or provided by the issuer of the card prior to publication.
  • Rewards

    3% cash back on goods or services purchased directly from Apple (including Apple retail stores, the Apple online store, the App Store, iTunes, Apple Music and other Apple-owned properties) on Uber and UberEats, at Walgreens and Duane Reade stores, on the Walgreens app and on Walgreens.com, in T-Mobile stores, at Nike, at Exxon and Mobil stations and at Panera Bread, 2% cash back on Apple Pay purchases and 1% cash back on all other purchases

  • Welcome bonus

    None

  • Annual fee

    $0

  • Intro APR

    None

  • Regular APR

    10.99% to 21.99% variable

  • Balance transfer fee

    None

  • Foreign transaction fee

    None

  • Credit needed

    N/A

Terms apply.

Petal® 2 "Cash Back, No Fees" Visa® Credit Card

On Petal's secure site
  • Rewards

    1% cash back on eligible purchases right away and up to 1.5% cash back on eligible purchases after making 12 on-time monthly payments; 2% to 10% cash back at select merchants

  • Welcome bonus

    None

  • Annual fee

    $0

  • Intro APR

    None

  • Regular APR

    13.24% - 27.24% variable

  • Balance transfer fee

    N/A

  • Foreign transaction fee

    None

  • Credit needed

    Fair, Good, No Credit

Terms apply.

Don't miss: 25 key terms everyone with a credit card should know

Petal 2 Visa Credit Card issued by WebBank, Member FDIC.

Editorial Note: Opinions, analyses, reviews or recommendations expressed in this article are those of the Select editorial staff’s alone, and have not been reviewed, approved or otherwise endorsed by any third party.