Penalty Rate

Definition

  • A rate charged to a borrower after he or she makes two late payments. The rate is generally several percentage points higher than the card's current annual percentage rate. With some cards, a single late payment triggers the penalty rate.

Synonyms
fee ratio, percentage of compensation

Related Terms and Acronyms

  • Authorized User Definition,
    • Any person to whom you give permission to use a credit card account.
  • Average Daily Balance (ADB) Acronym, Important,
    • This is the method by which most credit cards calculate your payment due. An average daily balance is determined by adding each day's balance and then dividing that total by the number of days in a billing cycle. The average daily balance is then multiplied by a card's monthly periodic rate, which is calculated by dividing the annual percentage rate by 12.
  • Billing Statement Definition,
    • A monthly bill that is sent by a creditor to the customer that provides a summary of the activity on an account. This can include balances, purchases, payments, credits, and finance charges.
  • Card Holder Agreement Definition,
    • A written agreement or contract between a credit card holder and the credit issuer that details the terms and conditions of a credit card account. This agreement must include the Annual Percentage Rate, the monthly minimum payment formula, the annual fee if applicable, and the cardholder's rights in billing disputes. Changes to the agreement can be made at any time by the issuer with prior written notice.
  • Credit Card (CC) Acronym, Very Important,
    • A plastic card with a coded magnetic stripe that, when signed, entitles its bearer to a revolving line of credit, with a credit limit and interest rate determined by the borrower's income and credit report.
    A payment card that gives customers access to a revolving line of credit.
  • Credit Insurance Definition,
    • A policy that pays off the card debt should the borrower lose his job, die or become disabled. The structure of protection for a revolving credit card debt is calculated each month to cover only the debt that existed at the last billing cycle.
    • Insurance that covers borrowers and/or lenders if one is unable to repay debts.
  • Late Charge Definition,
    • A fee imposed on a borrower for not paying on time
  • Late Payment Definition,
    • A sum a borrower sends to a lender that is received past the date when it was due.
  • Over-the-limit Fee Definition,
    • A fee charged for exceeding the credit limit on the card.
  • Penalty Definition,
    • In mortgage terms, a penalty is a set rate or length of time the penalty will be charged based on the remaining loan amount. The penalty is usually three months interest or interest rate differential.
  • Secured Credit Card Definition,
    • A credit card that a cardholder secures with a savings deposit to ensure payment of the outstanding balance if the cardholder defaults on payments. It is used by people new to credit, or people trying to rebuild their poor credit ratings.
  • Visa (V) Acronym,
    • A type of credit card that is distributed by financial institutions around the world. A VISA card holder borrows money against a credit line and repays that money with interest if a balance is carried over from month to month.
    A brand of credit card.
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