Related Credit Card Article

"What Is A Universal Default?"

By admin | December 22nd, 2007 | Credit Cards

A universal default is a recent term which has been added to the user agreement of many credit card companies. It basically states that the bank or credit card company has the right to review your credit report whenever they choose, and if they find information on your report which lowers your credit score, they can increase the interest rate that you have on your credit cards.

As you can imagine, a provision like this only benefits the credit card companies, and takes advantage of people who are irresponsible. There are a number of things you can do which will cause the credit card companies to raise your interest rates. Being late on your mortgage, credit card, or car payments can cause your interest rates to go up even if it is your first offense. Going over you credit card limit is another thing which can cause your interest rates to suddenly increase.

If the credit card company or bank looks at all your combined debt, and they decide that you have too much debt, this can be a factor which causes them to increase your interest rate. While this may sound strange, having “too much”credit could also cause you interest rate to go up as well. While universal default may not be designed to harm consumers, it is obvious that it can. How can you avoid universal default? The best way to do this is to avoid doing anything which would give the credit card company an excuse to increase your interest rate.

Different companies have different rules, so you will want to read the user agreement to see which rules apply to your credit card. It will describe the rules you have to follow in order to avoid having your interest rate increase. Make sure your bills are always paid on time, and avoid taking on excessive amounts of debt as much as possible. If you are disciplined with how you handle your money, it is likely that you won’t have to worry about paying more in interest.

Almost half of all credit card companies currently have universal default terms placed in their user agreements. This means that there are about 50% of credit card companies which don’t. If you are shopping for a new credit card, look for cards which don’t have universal default terms. This can keep you from getting into a situation where your interest is increased. If you read your bill and notice that the interest rate has gone up, call your credit card company and inquire why it increased. You can also ask them to lower it.

More Information:

• ‘Universal default’ rules explained – from Bankrate.com
• Universal default – definition from Wikipedia
• Universal Default news - from the Washington Monthly
• Universal Default? – from about.com

Tags: Credit Cards, universal default

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