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credit cards faq/glossary
The most common questions asked about Credits Cards.
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Credit Card Glossary
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Penalty rate
definition
What does penalty rate mean?

With the use of a credit card, there are basically two major issues one has to stay away from: using the over-the-limit option and falling behind with one’s payments. The penalty rate comes to “regulate” these bad habits, and sometimes these fees are pretty high.

It is of utmost importance that you as a card holder pay particular attention to the cardholder agreement, because there will be stated all the terms and conditions you should fulfill; moreover by actually knowing what is stated in the cardholder agreement there will be no surprises reaching you. Usually the APR and its system of calculation differs from one issuer to the other, but this is again an aspect you can find detailed in the agreement. So, if the standard APR is high and a penalty rate will be applied, it will become even higher.

For example, if the APR is 17%, but if you have skipped payments or have gone over the limit many times, this APR charged on your monthly bill can spring up to 20%, or even more. Always make sure you know your credit limit, and keep expenditures well below that level; make those minimum required payments due the date requested.
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