Definition
The default rate is a higher interest rate charged on a credit card as a penalty for violating the terms of the cardholder agreement.
Analysis
At one point of time in the 2000-2007 years, universal default could trigger a default rate penalty even if you had never violated the terms of the cardholder agreement. Unversal default has been phased out by most credit card issuers due to Congressional threats of greater regulation.
Instead, a default rate generally must be triggered by an event either on that particular credit card or on another account that you hold with the same creditor. In other words, if you missed a payment on a Capital One credit card, then it is possible that the default rate could be applied to all of your Capital One accounts. This is true for most major credit card issuers.
The default rate is established in the terms of your cardholder agreement. It is commonly listed as a rate of 24-28% APR.
Credit card issuers periodically update the terms of the cardholder agreement. This frequently includes an increase to the default rate that would be charged should you violate any term of the cardholder agreement.
These higher interest rates can make repayment of debt very difficult, since it also increases your required monthly minimum payments. You can get help with credit card interest rates through credit counseling.
