Financial decisions and management are the most difficult ones. There are plenty of pros and cons that you need to address. For instance, the Penalty APR would hugely result in financial stress on the budget. Do you want to stay away from this? If yes, you should know what this is all about and its causes.
Do you have a penalty APR on your credit cards?
Have you made a payment with a delay of sixty days? If yes, then you will face a penalty APR. It is more of an APR that applies to your future and present balances. You incur an APR in your account when you make a sixty-day late payment. You can avoid it easily. You need to stay on top of all your bills.
But what's the reason that credit cards charge penalty APRs? You must be wondering about that. If you make a late payment, the credit card issuing company will take an added risk that the user might only pay partially. Credit card companies resort to APR penalties as a medium to avoid this risk. It's done to motivate the cardholders to make timely payments a practice. In that case, there will be no hidden fees and no penalty APR.
How does the penalty APR function?
Your penalty APR can be 29.999% and even higher! But usually, it's lower based on the credit card. The increased rate might apply to future buys and the current balance once you finish the sixty-day late payment or take more days. It's applicable if the users commit another action enabling a penalty APR based on the credit card agreement. It comprises recording more than the credit limit or when a cheque is returned.
If more than one or just one late payment leads to a penalty APR, the credit card company must alert you of the same. You also need to remember that a sentence APR might erase all the introductory 0% APR offer on the balance transfer or purchases. It takes place in addition to the daily interest rate of the card.
The best five tips for averting the penalty APR's
Several cards enable you to correct your penalty APR on future buys. It takes place six months after the on-time payments get cleared. However, it's ideal that you don't pay the penalty APR in the first place. The five tips discussed below can make that happen.
Get into a negotiation with your lender.
Will you be late for future credit card payments? If yes, you can call the credit card company before payment. Check if you do something about it. Sometimes, it will help you minimize the penalties, allow you to skip one payment, or assist in creating a payment schedule.
Merely asking won't get the job done. It generally is best when you make your payments on time. But if, on the other hand, you are missing payments frequently, then the credit card companies might be less generous to you the next time you require any alternative solutions.
Make sure you know all about your credit card agreement
Being an updated customer is essential. You need to read most of your credit card agreement for this. You have a chosen section allotted to the disclosures that highlight what the penalty APR will be. You also get to know when the APR will be applicable.
You need to maintain your credit card statements.
Want a way to stop making a late payments? Keep reading each statement that you get. Pay them right after you go through the same. Also, you can make a credit card statement lists that you can get every month. You also need to check off every cash statement after it arrives.
Keep a check on this list daily to ensure that you don't lose any statements. You could also set up an auto-pay system from the credit card. It would ensure that all your dues get cleared gradually on time, and you don't need to run into any penalties.
Always ensure that your credit card balance is deficient.
More charges on your credit card will lead to increased minimum payments. Sometimes, those minimum payments come up until you can afford them further. It results in late fees. Make sure that your credit card balance is always low. It should only charge the expenses you can afford to pay in one go. It will help to keep your balance in check.
Try to get a credit card having zero APR.
Do you want to put an end to all your APR penalty worries? If yes, then you have an easy solution. You can use credit cards that don't have a penalty APR. Do these kinds of cards exist? The answer is yes. You merely need to search observantly and get the one designed for your needs. And some cards that don't have APRs might have minimal late fees. So, you must keep up to date and avoid all these extra payments.
At this point, you might be asking whether the penalty APRs are forever. It happens because of the 2009 Card Act. After you have made your payments on time, the credit card companies will lessen the rate on the outstanding balance you need to clear for six months. So now you can be back to your initial rate of interest. However, the company can still have the penalty APR on other expenses.
On the other hand, only some credit card companies benefit from a penalty APR in future purchases. Instead, you should focus on lowering the APR you have been paying. It will work towards minimizing the wholesale rate after six months of on-time payment. However, you must know this but do wait to start to count on it.
