Can a creditor increase your interest rate after a missed payment?
Falling behind on a credit card balance can get expensive fast, but the rules around rate hikes still play a role.
Credit card issuers can raise your interest rate after a missed payment, but this depends on how late the payment is and which part of your balance is affected. This is allowed under the CARD Act of 2009 and is known as a penalty APR. To impose a penalty APR, a creditor must disclose it in the card's terms and conditions and provide notice at least 45 days before it takes effect.
The issuer can also review the penalty-rate accounts every six months and may lower the rate if payments have been made on time for six consecutive months. Missing a payment by a week or two usually only leads to a late fee, but two full billing cycles without a payment can trigger a retroactive rate increase, making the balance much more expensive.
If you're regularly late on payments, consider contacting the issuer for hardship programs or exploring broader debt relief options like debt management plans or debt consolidation. Debt forgiveness may be an option for those significantly behind on payments, but it can have serious credit consequences.
Written by urgent.news from CBS News's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
