Most consumers are not aware of the latest consumer credit trap known as “universal default” until it affects them personally. Although this information is required to be disclosed in practicing lender’s credit card agreements, it’s only mentioned in the proverbial fine print. Consumers are unaware of the dangers they face because they simply did not read through this information or if they did, they did not understand it. <font face="arial" size="2" color="#990000"><b> So what is Universal Default? </b></font> Picture this…you’ve been paying your credit card bill on time every month, but this month’s statement shows an increase in your interest rate from 10% to 29.99%. What is going on? Why did this happen? Universal default comes into play when a consumer who has excellent credit and a high credit score suddenly has a negative item appear on their credit profile. The universal default clause kicks in, meaning essentially that if you are in default (delinquent) with one lender, you are in default with all. The lender then has the right to increase your interest rate without any warning or explanation. This practice has been around for a couple of years but mostly involved sub-prime borrowers that were more of a credit risk than other consumers. With Americans carrying more and more debt these days, creditors are monitoring their current customer’s credit reports with a fine-toothed comb, looking for signs of trouble and for any reason to increase your rate. In some cases, the rates have doubled or even tripled. Some creditors review your credit report monthly, some quarterly and some yearly. There are still some creditors that don’t review at all once the credit is extended. Those customers that have been late in the past will be monitored more often. Over 1/3 of major credit card issuers say they now act on the clause regularly, with 39% stating they do apply the rule even if the customer has never been late on their own card. Pay your credit card bill late and you may even find your car insurance premiums rising, as many providers are also invoking the universal default clause. <font face="arial" size="2" color="#990000"><b> What can you do to protect yourself? </b></font> <ul><li> Consider paying bills when they arrive as opposed to when they are due to ensure sufficient posting time. </li> <li> Contact the creditor for a more convenient due date if needed.</li> <li> Pay your bills electronically whenever possible to ensure immediate posting.</li> <li> Check disclosures to determine if they contain the universal default clause. If you find they do, consider transferring your balance to another card without one. </li> <li> Always read the fine print before entering into any legally binding agreement. </li></ul> Most consumers are not aware of the latest consumer credit trap known as “universal default” until it affects them personally. Although this information is required to be disclosed in practicing lender’s credit card agreements, it’s only mentioned in the proverbial fine print. Consumers are unaware of the dangers they face because they simply did not read through this information or if they did, they did not understand it.

So what is Universal Default?
Picture this…you’ve been paying your credit card bill on time every month, but this month’s statement shows an increase in your interest rate from 10% to 29.99%.
What is going on? Why did this happen?

Universal default comes into play when a consumer who has excellent credit and a high credit score suddenly has a negative item appear on their credit profile. The universal default clause kicks in, meaning essentially that if you are in default (delinquent) with one lender, you are in default with all. The lender then has the right to increase your interest rate without any warning or explanation.

This practice has been around for a couple of years but mostly involved sub-prime borrowers that were more of a credit risk than other consumers. With Americans carrying more and more debt these days, creditors are monitoring their current customer’s credit reports with a fine-toothed comb, looking for signs of trouble and for any reason to increase your rate. In some cases, the rates have doubled or even tripled. Some creditors review your credit report monthly, some quarterly and some yearly. There are still some creditors that don’t review at all once the credit is extended. Those customers that have been late in the past will be monitored more often.

Over 1/3 of major credit card issuers say they now act on the clause regularly, with 39% stating they do apply the rule even if the customer has never been late on their own card. Pay your credit card bill late and you may even find your car insurance premiums rising, as many providers are also invoking the universal default clause.

What can you do to protect yourself?

• Consider paying bills when they arrive as opposed to when they are due to ensure sufficient posting time.


• Contact the creditor for a more convenient due date if needed.


• Pay your bills electronically whenever possible to ensure immediate posting.
• Check disclosures to determine if they contain the universal default clause. If you find they do, consider transferring your balance to another card without one.
• Always read the fine print before entering into any legally binding agreement.