Pouring Salt on the Wound: Your Credit Card’s Universal Default Provision
By Chip Parker, Jacksonville Bankruptcy Attorney on Feb 4, 2007 in Florida, General Bankruptcy Information
When was the last time you read your credit card agreement? You know the one that came in your statement a few months back? If you’re like almost every single consumer, you’ve never read that agreement. Well, there’s one term that needs your attention right away: The Universal Default Provision. It’s there, and it’s the way Visa and the like get to pour salt on your financial wounds.
In a nutshell, if you are late on even one of your credit card payment, the interest rate on every single credit card you carry can be bumped up to their ”default” rate, in many cases over 30% A.P.R.! Even on the credit cards you pay on time every month!
According to the credit card industry’s web site, CreditCards.com, “Universal default is a relatively new provision that has been added to the credit card member terms and conditions by credit card companies. Universal default basically allows creditors to review a customer’s credit report on a regular basis, and if there is any change that has negatively impacted their credit score a new, higher interest rate can be applied.”
According to the credit card companies, the customer behaviors that can trigger universal default include the following:
- Being late (even once) on a credit card, mortgage, utility or car payment
- Going over the credit limit on any credit card
- Carrying too much debt overall
- Using over 50% of the credit line for an individual credit card
- Having too much available credit and open trade lines
- Making too many credit inquiries
- Getting a new mortgage or car loan
Even if you have a great credit history, one financial bump in the road can cause an economic collapse.
For tips on how to avoid triggering the universal default provision, see this article on Credit Card Basics from Bankrate.com.
Copyright © Chip Parker. All rights reserved.
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