A penalty APR is a punitive interest rate applied by a lender when you break the terms of your credit agreement.
Triggers for Penalty APR
The most common triggers are missing a minimum payment, paying late, or exceeding your credit limit.
The Consequences
If triggered, your rate could jump from 19.9% to 29.99% or higher. Furthermore, if you are on a 0% promotional deal, triggering a penalty APR usually cancels the 0% offer immediately.
How to Avoid It
Set up a Direct Debit for at least the minimum payment. Never rely on manual payments, as simply forgetting the date can trigger the penalty rate.