Default APR

Explanation: The penalty interest rate assessed on a credit card, which is in default. Default APRs are usually above 20 percent.

The definition of whether you are in default or not varies between credit card companies and based on whether you are using a small business credit card vs. a general consumer credit card. For some credit card companies, having missed a payment and/or having gone over limit can be considered as being in default.

Some cards have a 'Default APR' and a 'Max Default APR' for seriously defaulted accounts.

Our Thoughts: It is very important that you are aware of the Default APR so that you do not end up losing your Introductory APR or Regular APR. You can avoid going into default on your credit card by arranging for the monthly minimum payment to be automatically electronically transferred from your bank account to your credit card company each month.

Background: Since the new credit card law (Credit CARD Act) went into effect on Feb 2010, the Default APR is referenced as Penalty APR and there is a difference in the way the default APR applies to general consumer credit cards vs. small business credit cards. Read more by clicking on the 'Penalty APR' term from below.