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Weekly Tips

What's the Universal Default Clause?

Hidden deep in the small print of your credit card terms and conditions, you may find the dreaded policy known as the "Universal Default Clause". This clause gives credit card companies the ability to increase your interest rate to the maximum default when you make a late payment on ANY account that is part of your credit report.

For example, if you are late on your auto loan, your credit card company may dramatically increase your card's interest rate as soon as they check your credit report and verify the late payment. Is this fair to the consumer? Not really, but credit card issuers are looking for every way possible to increase their fee revenue these days.

In fact, recent studies indicate more than 30 percent of creditors are acting on the clause regularly. Closely read your credit card agreement today to determine if it includes a Universal Default Clause, and be sure to never carry high balances on any cards that do. Of course, you can avoid the problem altogether by automating your credit card payments online and ensuring that you never make late payments which might trigger the clause.


on Thu, 2008-07-17 17:00