Can Your Interest Rate Go Up While in Arrears?

Falling behind on a credit card does not automatically push your interest rate up. What arrears usually bring is extra charges and more interest on the balance, not a change to the rate itself. Extra charges are added if you miss payments, and more interest is added as the balance gets bigger¹. A rate rise is a separate decision, and a provider that makes one must contact you at least 30 days beforehand to give you notice².

If that notice arrives, you have a way out. Rejecting it normally means closing the account and repaying the balance at the existing rate, which is what Chase sets out in its own card terms³. Tesco Bank takes a slightly different route, letting you opt out by calling or writing within 60 days of being notified, so the revised rate or annual fee does not apply to you⁴.

The bigger risk in arrears is not the rate but the compounding. If you do not pay off the full amount every month on a credit card, you will be charged interest on the whole lot, not just the unpaid amount⁵. Interest is then added to the debt, and next time around it is applied to the increased amount of debt⁶.

How a credit card interest rate can change

A credit card rate is not fixed for life. Interest is charged as a percentage of the money you have borrowed, but the rate could vary based on the types of transaction you make⁹. Cash withdrawals are the clearest example: when you take cash out on your credit card, interest is added to your account straight away, even if you pay off the balance by the due date⁷. Paying for foreign currency by card carries a similar sting, with a cash advance fee, a higher APR and no interest-free period even if the bill is repaid in full and on time¹⁰.

Many cards also start on an introductory rate. This is where you start off paying a low rate of interest or none at all, and the rate then increases after a certain amount of time¹¹. That scheduled step-up is not a penalty and needs no arrears to trigger it.

Credit card rates also behave differently from other borrowing. Credit card rates are high and tend not to move with base rate changes¹², so a Bank of England decision does not automatically feed through to your card. Certain types of borrowing, such as overdrafts, revolving credit on your credit card and payday loans, also charge higher interest¹².

Where a rate does move, the driver is usually the provider's own commercial decision, or a change in your circumstances that the terms allow for. Average credit card interest rates rose by 3.6 percentage points compared with 2021, according to the Resolution Foundation¹³, which shows how much the market as a whole can shift over a few years.

Rate rises when you are behind on payments

Being in arrears changes the arithmetic more than it changes the rate. If you do not pay it off, you may be charged interest on the amount outstanding¹⁴, and if you do not pay your credit card bill, the company will add on interest each month¹⁵. The compounding effect is what makes arrears expensive: interest is added to the debt and next time around is applied to the increased amount of debt⁶.

There is a specific rule that catches people out. If you do not pay off the full amount every month on a credit card, you will be charged interest on the whole lot, not just the unpaid amount⁵. So a cardholder who clears most of a balance but not all of it can pay interest on purchases they thought they had already covered.

Providers also watch persistent debt. Your credit card company will write to you and ask you to increase your monthly payment¹, and your creditor may ask you to increase your monthly payments or decide to remove your access to that credit¹⁶. That is a repayment intervention rather than a rate rise, but it lands in the same place for a household budget.

Arrears also leave a mark beyond the interest line. A credit reference agency record will show if you are behind with your payments¹⁷. Missing payments can lead to extra charges and can negatively impact your credit score, and make it harder to get credit in the future¹⁸. Most lenders will either refuse you credit or charge a higher rate of interest¹⁹, so the cost of arrears can outlast the arrears themselves.

Notice of a rate increase and your right to reject it

The notice rule is the reader's main protection. If your credit card company decides to increase your interest rate, it must contact you at least 30 days beforehand to give you notice². TSB states the same commitment in its own card terms: "We'll tell you at least 30 days before increasing your interest rate."

The 60 day rejection window is the second half of the protection. Chase's terms describe the mechanics: "If you don't want to accept an interest rate increase, you can close the account and pay off the amount you owe at the unchanged rate."³ Tesco Bank's terms let a cardholder "call or write to us within 60 days of being notified about the increase" and choose not to make any further transactions, so the revised interest rate or annual fee will not apply⁴.

Two limits are worth knowing. First, the notice duty is not universal across all borrowing. For overdraft agreements, the obligation only applies if the rate of interest increases²¹, so a rate cut can pass without notice. Second, notice does not mean consent: a provider can still apply the higher rate if you do nothing, which is why the 60 day window matters.

Default charges and penalty interest in arrears

Arrears bring charges, and the rules draw a line between what is allowed and what is not. Extra charges are added if you miss payments¹, and charges and interest can be added if you go over the limit, which makes it harder to get further credit in future¹⁵. On short term loans, extra interest could be added, and a default notice allows the creditor to pass the debt to a collection agency or take court action²².

The line on unfairness is set out in guidance for creditors. Increasing the rate of interest because you have missed payments, continuing to add interest and charges if you are in financial difficulties, adding charges for actions the creditor has not done, and adding charges which are more than the actual cost to the creditor could all be classed as unfair⁸. That matters because it means a rate rise triggered purely by missed payments is contestable, not automatic.

Some charges are simply the price of a feature. Credit card payments will attract a surcharge²³, which is why paying a card bill by card is rarely worth it. Cash advances are charged from day one: interest is added to your account straight away, even if you pay off the balance by the due date⁷.

What happens to a promotional 0% rate if I miss a payment

A 0% deal is conditional, and a missed payment is the condition that breaks it. If you miss a payment during the 0% interest period, you may be charged a fee and lose your interest-free status. Money transfer cards work the same way: late or missed payments could mean forfeiting a 0% deal and having to pay higher interest rates²⁵.

The knock-on effect is not just the rate. If you miss a payment and move onto the regular APR, this could reflect negatively on your credit score and could also affect how much you can borrow in the future. So a single slip can cost the promotional rate, a fee, and some of your future borrowing headroom at the same time.

The practical point is that a 0% period is a deadline as well as a benefit. The rate then increases after a certain amount of time¹¹ even if you never miss a payment, so the end of the promotional window and the risk of losing it early are two separate dates to track. If a payment is going to be tight, telling the provider before the due date is a different conversation from missing it silently.

Where to get help with credit card arrears

Free, impartial help exists and it does not cost anything to use. MoneyHelper, Citizens Advice, National Debtline and StepChange all advise on card debt, and StepChange's own guidance for anyone whose income has dropped is blunt: stop using credit cards or adding to credit card debt²⁶.

Talking to the provider is the first practical step, and it can change the interest. Creditors should look at stopping or lowering charges and interest on a debt if you tell them you are in financial difficulty⁸. You may be able to make reduced payments or freeze interest and charges²⁷, and lenders can reduce or stop charging interest on your arrears²⁸. If you cannot afford your monthly payments, it may be possible to get interest and charges frozen, and in some cases debts reduced or written off²⁹.

The scale of the problem is not unusual. Two-thirds (67%) of StepChange clients with a high interest credit card missed at least one monthly repayment on it³⁰, and 35% of clients with a responsibility for paying council tax had arrears in February 2026³¹. StepChange has also reported rapid growth in the number of families struggling with arrears on essential bills, such as Council Tax, rent or heating, over the last five years³².

If a provider will not help, there is a route. Banks might reduce or waive interest, offer a continuation of overdraft borrowing at the current rate of interest, or agree on a repayment programme possibly including a personal loan³³. Where a complaint is not resolved, the Financial Ombudsman Service can look at it: credit cards generated 5,783 complaints in the first quarter of 2026/27³⁴, down from 6,600 new complaints in the same quarter a year earlier³⁵. In one redress approach, the ombudsman said it will first tell the business to identify whether any of the consumer's arrears relate to the addition of PPI and, if so, write off those arrears³³.