Has your credit card's interest rate jumped from 12% to 30% in just one month? If so, you have most likely fallen victim to the dreaded Default Interest Rate.
Generally looming in the 25% to 30% range, a default rate is significantly higher than the standard interest rate and is the new percentage to which the credit card's interest rate adjusts when the terms of the credit card agreement are broken.
Default interest rates are often referred to as "penalty rates" because an event that results in a penalty fee usually triggers the default rate as well. For example, make one late payment or exceed your account's credit limit, and your credit card's default interest rate may immediately go into effect.
So, be sure to read your credit card's terms and conditions today to find out exactly what your default rate is and how it can be triggered. If you're applying for a new credit card, refer to the Schumer Box for more detailed information on the default rate and other fees.
