If you're at all familiar with the world of credit cards, you probably know that interest rates charged by cards are typically in the high teens and low 20s. If that seems reasonable to you, think again. Even an 18% rate means that if you're carrying $8,000 in debt on your card(s), as does the average household with credit card debt, you're forking over $1,440 per year in interest alone. If your rate is in the low 20s, you're paying close to $2,000 per year. Ouch!

But for many people, the situation is much grimmer than that. When cardholders miss payments, make late payments, or go over their credit limit, many card-issuers hike the interest rates charged. (In fact, if you're late paying off one of your cards, your other cards may hike your rate!)

With interest rates in general on the rise, so are the punitive rates that card companies charge. According to the folks at the Coalition for Responsible Credit Practices and CardWeb.com, "Starting [in October], punitive interest rates, among the top ten issuers, will range from 24.65% to 30.74%. Across the entire U.S. credit card market, penalty interest rates will range from none to 41.00%." They add: "CompuCredit, an Atlanta-based issuer of 'Aspire VISA' card, charges an interest rate of prime +36.25% with a 41.00% minimum, to its most risky cardholders who become delinquent."

As of October 1, here are some top penalty rates for top card issuers:

Citibank (NYSE:C) 28.74%
MBNA (NYSE:KRB) 24.99%

J. P. Morgan Chase (NYSE:JPM)

26.74%
Morgan Stanley's (NYSE:MWD) Discover 24.99%
Capital One (NYSE:COF) 25.90%
American Express (NYSE:AXP) 26.74%

Source: CardWeb.com's CardWatch



What can you do about all this? Well, maintain good credit habits, to start. Pay your bills on time, don't exceed your limits, and above all, be an educated consumer. Read the fine print in card mailings and find out what the penalty rates are.

You can learn all kinds of eye-opening things about the credit card industry in our Credit Center, which also offers a special deal on getting copies of your credit report, so you can make sure it's correct. (Astonishingly, there's a very good chance that your report has errors on it.)

Read about all things credit-related on our Consumer Credit / Credit Card discussion board. And if you're mired in credit card debt, don't despair -- you can get out of debt and build a beautiful credit score.

Longtime Fool contributor Selena Maranjian does not own shares of any companies mentioned in this article.