Since most of us enjoy spending at least some of our time griping about credit card companies, here’s a little something to get you going—it’s called the Universal Default Clause.

As if getting approved for a credit card isn’t hard enough these days, credit card companies actually have a way to make it harder for you to hold on to your credit card.  And here’s how they do it…

A bank issues you a credit card with a certain interest rate and a certain spending limit.  As long as you don’t overcharge it and you make all your payments on time, you should be fine, right? Not necessarily.

They can raise your Interest

The Universal Default Clause gives credit card companies the right to raise your interest if they feel that you’re a potential risk, and especially if you default on any one of your monthly bills.  Whether it’s another credit card payment, a utility bill, or even your car payment—your interest will go up if you don’t make all your payments on time.

But how do they get away with it?  The Universal Default Clause was enacted to compensate for the lender’s risk of extending credit to persons who have difficulty paying their bills.
And believe it or not, they regularly check your credit report to see if you have and late pays, overcharges, or insufficient payments.  Literally—they’re looking for a way to hit you, and if you give them a reason to, they will.

They can lower your Limit

In addition to raising your interest rate, credit card companies can also lower your credit limit if you’re deemed a “potential risk.”  And this can be the beginning of disaster. 

When your credit limit is lowered, your balance to limit ratio shifts, putting you even further into “risk” status.  Other creditors will probably notice this, and the result:  you’re caught in a cross-fire of raised interest, lowered limits and some serious money problems. 

And Most of them are Doing it…

That’s right.  More and more credit card companies are including the Universal Default Clause in their contracts, and if you are unfortunate enough to get hit by more than one creditor, you’ll really have to hustle if you want to avoid damaged credit.

Congress is currently debating the integrity if the Universal Default Clause and hopefully it will be decided that credit card companies should just mind their own business.  But until then, it’s never been more important to read and understand your contracts, manage your credit cards, and most importantly: pay your bills on time! Don’t get caught in the Universal Default Clause trap, and don’t give credit card companies an excuse to bully you. 

If your having problems, or would like a free consultation please give us a call: Credit Repair Services