Guilty as charged-- there have been a few instances when I missed a credit card payment and all but went into cardiac arrest when I realized my default APR was activated, and now my interest rate was going to be 29%! Ouch! It could have been a costly mistake, but on all but one occasion my smooth talking and a fee got me back to my regular APR.  

I am typical of the average consumer, and of course I am human-- I make mistakes. Unfortunately, when it comes to finances, especially credit cards, these mistakes can end up costing you a bundle. 

Hopefully most of you have heard about the Credit Card Accountability, Responsibility and Disclosure (CARD) Act of 2009, put into effect February 22, 2010, and know your consumer rights.

For those of us that have been in this situation and have been hit with a hefty rate increase after missing a payment, there is new hope. Let's take a look at the CARD Act and what you can do if you have experienced a rate hike. 

You have had your oops moment and receive notice that your default APR has been activated. Your default APR is the interest rate applied to a portion of your credit card balance when you do not follow the terms and conditions of your credit card agreement. This can be found in the 2 point font in the disclosure section. 

Prior to the CARD Act you would now be responsible for paying your existing balance (purchases you have already made) at the default rate. Now, the only way your credit card company can apply the penalty APR to your existing balance is if you are 60 days late with your minimum payment. Hopefully you realize the mistake upon receipt of your billing statement and can rectify it before being hit with the default rate. 

Maybe you are really struggling with your finances and you hit that 60-day mark, then what? The CARD Act states that once the rate is increased on an existing balance because you were 60 days delinquent, you can redeem yourself by making consecutive payments for six months. Upon your prompt payments you can return to your non-penalty APR.  

It is important to note this does not apply to future transactions, as they are not part of the provisions under the CARD Act.  If you miss a payment here, or go over your limit, you are stuck with the default rate. The silver lining is that you will know it is coming! Credit card companies are now required to send you a notice specifying the reason for the rate increase 45 days in advance, and the rate increase can only apply to purchases made 14 days after the notice was sent.  

So, if you are like me and miss a payment while you are trying to juggle all of your responsibilities during a divorce, the CARD Act can help you get back on track and avoid further damage to your finances caused by an increased interest rate.  

But maybe you are going through a divorce and have the pleasure of obtaining said credit card and can't pay the bill for the next few months; unfortunately the CARD Act can do little to help you. Six months of consecutive payments are tough to make when you are struggling financially as many of us are following a divorce. If you fall into the default APR and can't get back on track, you may want to consider your options. A Debt Management Plan (DMP) is an excellent way to help you get back on track and receive benefits, such as reduced interest rates from your creditors. Keep in mind this is not for everyone and if you can't afford to make the new consolidated payment in a Debt Management Plan you may fall back into the same situation. If you can't afford a Debt Management Plan, you may want to consider Debt Settlement.

Make a plan for yourself. Start with a budget, see where you can cut back, and maybe even take on a part-time job until you can dig yourself out. Where there's a will, there's a way. Don't give up, take action!

Related Posts: 

Know Your Assets

3 Financial Details You Don't Want to Miss

5 Smart Financial Moves to Make after Divorce 

Suzanne is a certified credit counselor working in our Ask the Expert forums as a coach and a Social Media Specialist for CareOne. Suzanne writes for our Divorce, Debt and Finances and A Straight Talk on Debt blogs. Ask her questions, share your story or just follow Suzanne on her journey as she discusses dealing with divorce, debt, and finances. Follow Suzanne on Twitter: ADivorcedMom and Ask CareOne where she shares the latest debt industry news and tips to keep your finances in check.

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