Credit Cards Utilizing the Universal Default Provision Can Bankrupt You!
The dreaded “universal default” what is it and how can it effect you? If you are someone who uses a credit card and runs a balance then pay attention. Universal default is a clause written into your credit agreement that allows them to raise your interest rate if they deem you a credit risk. So what can deem you to be a credit risk?
Paying late with another creditor, even if you have never paid late with the creditor raising your rate. What they do is pull your credit report and if you have paid late with anything then that gives them the legal right to raise your interest rate. Usually it will go up to 25% or more. Another big reason they deem you a credit risk is if you are maxed out on your cards, or close to it. So what will happen once my rate gets raised? Once your rate goes from a moderate rate like 7% up to 25% or more your minimum payments will double sometimes triple. Making it much harder to stay on top. So at his point you will be losing much more money in interest and will be in debt for a very long time.
Back in April of 2007 Congress held a Senate Sub-Committee hearing to discuss with the CEO’s of the major credit card companies more about these deceptive and abusive practices. Of all the credit card companies attending, CitiBank was the only company with credit cards utilizing universal default provision that said they would stop. For many people put in this dire financial situation the only solution to their problem will be bankruptcy or
credit card debt settlement.
