In finances, a penalty is any form of negative occurrence and is usually assessed in the form of a specified monetary amount. Common penalties include late payment fees, over limit fees, overdraft fees, nonsufficient check fees, and early payoff fees. In some cases, penalties must be satisfied by funds unrelated to the loan while in other cases-notable with credit card accounts-the penalties are generally charged directly to the account itself.
Penalties must be specified in the contract, both as to when they can and will be assessed and as to how severe they will be in any given instance. You should be aware that if your credit card account has a long history of being in good standing the credit card company may waive some occasional penalties upon request.