1. What is Credit Card Late Payment Interest?

Credit card late payment interest is the penalty charged when you fail to make at least the minimum payment by the due date. The IRS allows credit card companies to charge penalty APRs (typically 29.99%) on unpaid balances.

2. How Does the Calculator Work?

The calculator uses the late payment interest formula:

Where:

• \( P \) — Unpaid balance (USD)
• \( R_{lp} \) — Monthly late payment interest rate (Penalty APR / 12, as a decimal)
• \( I \) — Interest charged (USD)

Explanation: The penalty APR is divided by 12 to get the monthly rate, which is then multiplied by the unpaid balance to calculate the interest charge.

3. Importance of Calculating Late Payment Interest

Details: Understanding late payment interest helps consumers realize the true cost of missed payments and encourages timely payments to avoid accumulating excessive interest charges.

4. Using the Calculator

Tips: Enter your unpaid balance in USD and the penalty APR percentage (typically 29.99%). The calculator will show the interest that would be charged for one month of late payment.

5. Frequently Asked Questions (FAQ)

Q1: What is a typical penalty APR?
A: Most credit cards charge 29.99% APR as a penalty rate for late payments, though this can vary by issuer.

Q2: How long does the penalty APR last?
A: By law, after 6 consecutive on-time payments, the issuer must review your rate and may lower it back to the standard APR.

Q3: Does this include late fees?
A: No, this calculates only the interest on unpaid balances. Most cards also charge separate late fees ($25-$40).

Q4: Can I avoid penalty APR?
A: Some issuers may waive the first late payment penalty if you have a good history and contact them promptly.

Q5: Is this tax deductible?
A: No, the IRS does not allow deduction of credit card interest, including penalty interest, for personal credit cards.