As long as you keep the conditions of your credit card and keep your card in good standing, you will enjoy the lower interest rate. However, certain errors can solve the default rate, an interest rate that can make it more expensive to pay a balance and harder to pay for your credit card.
What is a default credit card interest rate?
The credit card default rate, more commonly referred to as the penalty rate, is the highest interest rate charged by a creditor or lender, usually as a penalty for delinquent payments to be made by 60 days or more, excepeds the credit limit, or your credit card with payment back from yours bank.
Credit card default rates are usually around 29.99%. $ 20.54 to $ 1,000 credit on average failure rate The financing cost would be. Compare that to the $ 10.27 financing cost you would pay on the same amount but at a much lower 15% interest rate and you will see how expensive the failure rate can be.
If your credit card issuer raises your interest rate to the standard rate, you can cut it in six months as long as your credit card terms remain. This means that your payment on time, stay within your credit limit, and always have enough money in your checking account to cover your credit card payment so that your payment is not returned.
Depending on your credit card terms, the rate might just go down based on your existing balance. Some creditors can still apply the higher rate of new purchases after the penalty interest has been made effective.
Three ways to avoid the failure rate
It is not difficult to avoid the default rate on your credit card balance. Follow the basic rules below and you can avoid having your interest rate increased to the standard rate.
- Make all your payments on time. If you are late on a payment, get caught up in quickly because the default rate kicks in after you are 60 days late, ie two missed payments in a row.
- Stay below your credit limit. While many credit card companies have eliminated the over-the-limit fee, they have the trigger failure rate not eliminated if you happen to charge more than your limit.
- Make sure that you have enough money in your checking account to cover your payment. Checks returned not only result in a repayment fee, but they also solve the default rate.
Thanks to the Credit Card Act of 2009, there is no longer a universal standard where any creditor could increase your rates to the standard rate just because you were late or over the limit with another credit card.
Credit and Loan Industry Standard Rate
Another type of default rate is used by the lending and loan industry to measure the number of credit card holders and loan borrowers who are late on payments. This default rate holds credit cards that are overdue but have not yet been loaded-off or bankrupt and mortgages and auto loans that are more than three months past due.
The failure rate can be used to measure the health of the economy. Increasing default rates – more borrowers being late on their credit card and loan payments – could mean the economy is experiencing difficulties. High mortgage default rates mean an increase in foreclosures might be on the way.