Consumers who get a payment due notice from their credit card company now receive a lower penalty rate than they did in 2012.
The average penalty rate is now 28.45%, according a survey conducted by Creditcards.com in October 2014. Penalty rates can be triggered by late payments, credit limit abuse, and/or bounce checks.
This is a small, but noteworthy, reduction from the 28.60% penalty interest rate that consumers received two years ago.
The lowered penalty interest rate is still very costly, but not as many credit card companies are issuing penalty rates since 2009, when the credit CARD Act enforced new rules and placed a limit on penalty fees.
60 of 100 cards included in the survey imposed a penalty rate. Most card companies calculate APR (annual percentage rate) based on credit worthiness, while the others use the prime rate plus, a specific amount.
The lowest penalty rate is 17.99% and the highest is 30.24%.
The late payment fee is capped at $37.
Under the CARD Act, the penalty or default rate should be cancelled if customers make six consecutive payments on time, but not all companies make this information public.
Some of the 40 credit cards that do not offer penalty rates include Discover (DFS), Capital One and the WalMart (WMTCX-CL) Mastercard.
You can find the credit card penalty rate on your monthly statements.