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A
penalty rate is a change (an increase) in the
current annual percentage rate. A penalty rate is
usually triggered after a card holder has made one
or more late payments. The amount of the penalty
rate that will be charged is listed in the
card holder agreement. The penalty rate
frequently is a percentage increase of about 2 to
3%. An issuer might impose a penalty rate if a
late payment is made on some other
credit card, or if a consumer defaults on
another loan, or if the consumer carries too high
a balance. Such actions are indications the
consumer has become a credit risk.
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