While it is good to be aware of what a penalty APR is, you definitely do not want your credit card company to charge you with one. A penalty APR is essentially an extremely high annual percentage rate that your creditor could charge you with - typically 29.99%. Some cards could have a lower penalty APR, too. Not all credit cards come with a penalty APR though, so check your credit card agreement and read the fine print to be doubly sure!

Most often than not, the penalty APR will kick in and be applied to your account if you make a late payment or make a payment that is returned. Your credit card company may let you off the hook if it's your first time missing payment, but you likely won't be so lucky if you skip payment consecutively.

Given how high the penalty APR can potentially be, it is extremely detrimental if you are someone who tends to make late payments and carry balances on your account. It has the means to put a major financial strain on your budget especially if the balance you carry is a rather large one . A penalty APR will make it much harder for you to pay down your existing credit card debt since you are accumulating more interest in lesser time.

Depending on your creditworthiness, your penalty APR may be reduced or lifted over time when you start making payments consistently month after month. If you miss payments repeatedly despite the penalty APR, it could very well be applied to your account indefinitely. Your credit card company has to review your account at least once every 6 months to decide whether it is OK for your APR to be lowered.

Making payments punctually consistently is always a good idea; you get to avoid unnecessary extra charges (think: late fees, returned payment fees, high interest payment), enjoy a relatively lower APR and get extra brownie points for your credit report.

That is why even if your credit card does come with a penalty APR, you do not have to be worried if you have the good habit of paying your credit card bills punctually every month. Consider setting up automatic payments that cover the full balance so you never have to worry about paying any interest or late fees!

Denise Bay is a staff writer at GET.com. Email: denise.bay@get.com.