NEW YORK (MainStreet) – Banks and credit card companies are in a giving mood this holiday season, which means only that they'll put a little less coal in everyone's stocking.

Folks who fall behind in credit card payments face an average penalty rate of 28.45% according to a CreditCards.com survey of 100 U.S. credit cards. The good news is that said penalty is down slightly from a 28.60% APR in 2012. For those fortunate enough to be blissfully unaware, penalty rates are the ridiculous APRs a bank charges a cardholder for making a big mistake. Typically, cardholder have to be 60 days or more late with a payment for those rates to kick in.

If you're a cardholder whose finances rely heavily on revolving credit and the balance it allows you to carry, those penalty rates can be substantial. If you're carrying a $4,000 balance on a card charging 11.82% — the average rate for those carrying a balance, according to the Federal Reserve — a boost up to the 28.45% percent average penalty rate would cost an extra $665.20 in interest alone each year.

“This drives home, once again, just how incredibly important it is to pay your bills on time every time,” said Matt Schulz, CreditCards.com’s senior industry analyst. “Debt can grow quickly even with an average interest rate. But when you’re hit with a penalty rate, things can get out of control in a hurry.”

And they did. Back in 2010, 91% of banks and card issuers used these penalty rates to bludgeon cardholders who fell behind. After the 2009 Credit Card Accountability, Responsibility and Disclosure Act went into effect and blunted some of card issuers' more draconian measures, reforms pushed the ranks of penalty-embracing issuers to 69%. This year, that pool decreased to just 60%.

Even those remaining penalties vary broadly depending on the issuer. Among companies charging a penalty rate, the 17.99% rate assessed on Pentagon Federal Credit Union's Cash Rewards Visa (V) Standard card is by far the lowest. Meanwhile, the National Football League and Barclays (BCS) have teamed up to impose the highest penalty rate, 30.24%, for their NFL Extra Points card.

Of course, it would help if those card issuers gave cardholders a heads-up about those high penalty fees from the outset. Only 23 cards disclose penalty rate information in the card terms and conditions. Meanwhile, a full 77 cards required follow-up phone calls or review of cardholder agreements to confirm the penalty rate.

Even when cardholders are working their way out of the credit doghouse, issuers are in no rush to tell them how to escape the penalty rate. The CARD Act required lenders to revoke the penalty rate if consumers make six consecutive on-time payments after the penalty rate is applied, but just 38 of the 60 cards that issue penalty rates made that clear in their publicly available documents.

Keep in mind that, of the 60 cards in the survey that have a penalty interest rate of some kind, 28 have penalty APRs based on the prime rate plus a specified percent. Rates based on the prime rate can move up automatically when that index rises, as it is expected to in 2015. Another 32 cards calculate a cardholder's penalty APR based on creditworthiness.

Those are all things applicants usually like to know before they sign themselves into a credit card agreement that hammers them so harshly for a late payment. While companies are getting better about notifying cardholders of penalty fees and eliminating them altogether, sharing simple information about a credit card account shouldn't be treated like holiday gift giving: That information isn't more special when it's a surprise.

— By Jason Notte for MainStreet 

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