Universal Default - The credit card GOTCHA!

“Universal Default” is the credit card industry way of seeming to give you something for nothing and then REALLY make you pay for it.  Here is how it works.

 Let’s say you previously used one of those “checks” they send you in your statement to borrow money on your VISA account at a low interest rate.  You read the fine print that said if you are ever late they reserve the right to discontinue those terms and return you to your regular rate (remember this is a cash advance so it is higher than your normal rate).  But you are a smart person and you say “I will make sure to NEVER be late on this card to keep the low rate”.  Well Dorothy I have some bad news for you, you are matching wits with some pretty savvy people down their at CREDIT CARD INC that are use to things going their way and they spend millions of dollars lobbying to make sure things stay in their favor.  Here is where universal default can bite you hard.

 On your very rarely used XYZ store credit card, that you only got to get a discount a Christmas, you have a small balance.  Because you don’t recognize this card as one of your “regulars” maybe it ends up in the “I will deal with this junk later” inbox and you end up missing the payment, once.  Guess what, that one innocent slip up gives ALL your other credit cards the right to raise your rates to astronomical heights (not just your regular high rate, I mean really high what is the legal limit high levels). 

 So the next month when you open your VISA, MasterCard, Discover statements you fall over and hit your head with the interest charges you see.  Once you recover you call the company to discuss the obvious mistake only to find out that because of that one innocent mistake all your balances are now at extremely high levels. 

 Now all credit card companies do not automatically invoke their right to use Universal Default clauses as soon as you slip but they can and often due.  You as the consumer have to ask yourself “why does my 15% rate credit card want to offer me a loan for the next year at 2.99%? They must really like me.”  If you believe that I think there is a guy somewhere with a bridge he wants to sell you, cheap.