What It Means
Default rate, sometimes called penalty APR, is a higher interest rate triggered when a cardholder violates the cardholder agreement-typically by paying late or exceeding the credit limit. Under the CARD Act of 2009, penalty APRs cannot be applied to existing balances unless the account is more than 60 days past due. Once triggered, the issuer must review the account every six months and reduce the rate if the cardholder makes six consecutive on-time payments.