Just when you thought credit card companies couldn't be any more irksome (to be diplomatic about the whole thing) along comes "universal default." Universal default has been around for a long time, truth be told, but the concept will still be news to most people, and will get your goat no matter how many times you've heard of it.
What is Universal Default?
In essence, universal default is when your credit card -- the one you've got a perfect payment record with -- jacks your interest rates through the roof because they found out you were late once on another card or other debt payment plan. The card or debt payment plan does not have to be affiliated with the credit card that's doing the rate jacking, either.
Why Don't Credit Card Companies Tell You?
Universal default notification is, naturally, buried in the fine print of the cardholder agreements of the credit card companies that employ it.
Universal default clauses are very often associated with credit card offers of zero-percent interest rates and zero-percent financing. This way, the credit card issuer can back out of their offer for 0% APR, and, as part of the default clause legal wording, slam you with a new interest rate that is truly punitive in nature. Basically, if you miss a payment on any debt, at any time, for any reason, the default clause will be invoked and you will get a much higher interest rate.
How to Avoid Universal Default
To avoid universal default, read the fine print before you sign the credit card agreement.
If you don't have time to read the fine print then call the credit card's customer service line and ask them -- it's what they're paid to do. If you've already got a card with a universal default clause, you can cancel the card and transfer your balance to a card that doesn't have universal default, or you can simply be extra vigilant about paying all of your bills -- telephone, utilities, mortgage loan, college tuition -- on time.
To learn more about universal default and credit cards, consult with a consumer advocacy group or a financial adviser.
