As kids, if we make mistakes—like falling down when we are first learning to walk, our parents let us make those little mistakes in order to learn from what we had done. Unfortunately, the same doesn’t always hold true as adults, at least when it comes to your finances.

Almost a year after the Credit Card and Reform Act’s changes went into effect, I still feel unclear about the role and understanding of penalty pricing on credit cards—and the penalties, we as consumers pay for a little mistake, such as a late payment. All I know for sure is the number of offers I have received hasn’t changed much. In fact, I’ve recently received up to 3-4 credit card offers a week, and although I know I have one of the best credit cards out there, I am still intrigued by the offer of no interest for 6 months or rewards points. Chase, Citicard, American Express all have recently sent me offers. Unlike most consumers, I scour the fine print and fee pricing to see where the “real fine print” lies.

As part of the new act, disclosures and the “fine print” were redesigned to make it easier for consumers to understand and compare against all their card options. I didn’t think it helped much. I still feel confused on how to decipher what penalty pricing means and how a consumer “can make good” on his or her mistake. For instance, here is the penalty pricing section of one of the offers:

29.99%. This APR will vary with the market based on the prime rate. The penalty APR will be applicable to your account if you:

  • fail to make any minimum payment by the date and time due (late payment)
  • exceed your credit line (if applicable)
  • make a payment to us that is returned or unpaid; or
  • do any of the above on another account or loan you have with us or any of our related banks.


How long will the penalty APR apply: If your APRs increase for any of these reasons, the penalty APR will apply indefinitely.


If I understand this correctly, my APR would increase from the 11.99 percent offered to well over 29 percent if I fail to make any payment by the predefined due date. So let’s just say, I had excellent credit, was a long-term credit card customer, always made my payments on time—and simply missed one payment because of a little oversight. Would I really be punished indefinitely? Even as kids, if we made mistakes, even those that were intentional—like hitting our sister or brother, we were still able to come out of time out. We were not punished forever.

As a consumer, I do have a choice in the credit card I select to use. While this offer is just one of many offered to me in the mail, I could choose to apply for this card or not. If I did, and I never missed a payment in my life, I would go unaffected, right?  I think the reality is, even with the best intentions, we do make mistakes—it is human nature. Life moves so fast between kids’ soccer games, work, vacation—it‘s easy to have your finances take the back seat, even if just for a day or two. Be aware that the big banks and credit card companies, focused on earning money from you instead of for you, are not interested in you paying down your debt. You may not have been penalized yet, but you certainly don’t have to be. Check out your card’s terms and conditions. What penalty pricing does your card have?