Credit Card Penalty APR Rules: 60 Days Late, 45-Day Notice and Six On-Time Payments

Published by the Modern Lending Solutions editorial team. Last reviewed: October 30, 2026.

Short answer: on a credit card account, the issuer can apply a penalty rate to your existing balance only if it has not received your minimum payment within 60 days after its due date. It must send you a written notice at least 45 days before the higher rate starts. If you then make six minimum payments in a row on time, it must lower the rate on those earlier balances back to what it was. This is general information, not legal or financial advice.

The general rule: no rate increases, with exceptions

Regulation Z says a card issuer “must not increase an annual percentage rate” on a credit card account under an open-end (not home-secured) plan, except as its listed exceptions allow (12 CFR 1026.55(a) and (b), eCFR, text up to date as of October 28, 2026, read October 30, 2026). Two exceptions matter for a penalty rate: the delinquency exception and the advance notice exception. For rate increases in general, see credit card interest rate increase notice.

Penalty rate on your existing balance: more than 60 days late

An issuer may raise the rate because it did not receive “the consumer’s required minimum periodic payment within 60 days after the due date for that payment” (1026.55(b)(4)). The notice of the increase must say, clearly and conspicuously, the reason for the increase and that the higher rate will stop applying if the issuer receives six consecutive required minimum payments on or before the due date, starting with the first payment due after the increase takes effect (1026.55(b)(4)(i)).

If you make those six payments, the issuer “must reduce” the rate to the one that applied before the increase, for transactions made before or within 14 days after the notice was sent (1026.55(b)(4)(ii)).

Penalty rate on new purchases: the advance notice exception

Under the advance notice exception, an issuer that sends the required notice may raise the rate for future transactions, but it “must not apply that rate, fee, or charge to transactions that occurred prior to or within 14 days after provision of the notice” (1026.55(b)(3)(ii)). This exception does not allow a rate increase during the first year after the account is opened, while the account is closed, or while the issuer does not let you make new transactions (1026.55(b)(3)(iii)). So a late payment of less than 60 days may lead to a higher rate on new purchases after notice, while the balance you already had keeps its rate.

The 45-day penalty rate notice

When a rate goes up because of delinquency or default, or as a penalty for an event in the account agreement such as a late payment, the creditor must send a written notice “at least 45 days prior to the effective date of the increase”, and only after the event that triggers it (12 CFR 1026.9(g)(1) and (2), eCFR). The notice must include (1026.9(g)(3)(i)(A)):

A statement that the penalty rate has been triggered.
The date the penalty rate will apply.
When the penalty rate will stop applying, or that it may stay in effect for a potentially indefinite time.
Which balances it applies to, and any balances that keep the current rate unless you miss a minimum payment by 60 days.
For a credit card, no more than four main reasons for the increase, in order of importance.

When the increase is based on a payment more than 60 days late, the notice must also say that the increase will stop applying to transactions made before or within 14 days of the notice if you make six consecutive minimum payments on time (1026.9(g)(3)(i)(B)). On a periodic statement, this information must be in a table on the front of a page (1026.9(g)(3)(ii)(A)). For where it sits on your statement, see credit card statement explained.

Balances that keep the old rate

When a rate is raised under the advance notice exception, the amount you owed before the new rate can apply is a “protected balance” (1026.55(c)(1)). The issuer must not require you to repay it in a way that is less beneficial to you than one of these: the repayment method you had before, a payoff period of at least five years, or a minimum payment with a percentage of the balance no more than twice what it was before (1026.55(c)(2)). These limits still apply after the account is closed (1026.55(d)).

Rate reviews every six months

If an issuer raised your rate and a 45-day notice was required under 1026.9(c)(2) or (g), it must review the factors and lower the rate as appropriate (12 CFR 1026.59(a)(1), eCFR), “not less frequently than once every six months after the rate increase” (1026.59(c)). If a reduction is required, it must take effect no later than 45 days after the review (1026.59(a)(2)).

What a penalty rate can cost, only for the math

This example is only for the math. The $3,000.00 balance is an example figure, and so is the 29.99% penalty rate; your agreement shows your real penalty rate. The first rate is the Federal Reserve’s August 2026 average of 22.36% on credit card accounts assessed interest (G.19). One month of interest, as simple monthly interest on a balance that does not change:

Rate	Interest for one month on $3,000.00
22.36% (G.19 average)	$55.90
29.99% (example penalty rate)	$74.98
Difference	$19.08

$74.98 minus $55.90 is $19.08 a month, and $19.08 x 6 = $114.48 over six months. Your issuer’s own balance method may give a different figure. Late fees come on top; see credit card late fee rules.

Questions to ask the issuer

What is the penalty rate in my agreement, and what events trigger it?
Which of my balances will the higher rate apply to, and from what date?
If I make six minimum payments on time, which balances go back to the old rate?
When will you next review the rate on my account?
Can I set up automatic minimum payments so I do not miss a due date?

If you are thinking of moving the balance, compare the cost first: see credit card minimum payment vs a personal loan.

Checklist

Read any penalty rate notice the day it arrives and note the date the rate starts.
Pay on time; if you miss a due date, pay at least the minimum before 60 days pass.
Make six minimum payments in a row on time after a penalty rate starts.
Check later statements to see that the rate went back down on the earlier balances.
Keep copies of the notice and your payment records.

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Sources

Disclosure: Modern Lending Solutions is not a lender, loan broker or agent for any lender or loan broker, and does not make credit decisions. Any compensation we receive is paid by participating lenders, only for advertising services. This guide is general information, not financial or legal advice.

When Can a Credit Card Charge a Penalty APR?