Universal Default Triggers

by : Ronnica Rothe

What makes credit card debt worse than most other forms of debt is the high interest it carries. These high interest rates lengthen the amount of time that it will take you to pay it off and increase the amount needed to pay off the debt as well. The is just another way for credit card companies to increase your interest rate and get more money from you.

The universal default on the credit card is the interest rate that the card will default to for any of a number of reasons. This rate is often thirty percent or more. With this high of an interest rate, you will be paying a greater monthly payments with only a little of that going to pay down your debt. It will take a long time to pay off any significant amount of debt.

Most credit card companies have changed their terms to include a . This allows them to raise your interest rate to the universal default if you demonstrate any sign of financial witness in their eyes. Several things can fall into that category: late or missed payments on any debt even if it is not to them, having too much debt, credit score lowering, exceeding the credit limit on any card, payment checks bouncing, getting a new credit card, or acquiring about a new loan such as for a car or home.

These items generally impact your credit score and show up on your credit report which is how the credit card company knows about them. If they see these or similar signs of potentially negative activity, they may use it as grounds for raising your interest rate. You can see how paying one payment late could have a rippling effect on the rest of your debt, for example. If you are falling behind on one account, you will likely see increase in fees on other accounts as well which will probably push you into falling behind on those accounts as well. It is important to do whatever you can to stay current with all your accounts and never apply for more credit than necessary.

Since more and more public attention has been given to what credit card companies have been doing with universal default clauses, the United States Congress has put some pressure on the industry to change this practice. While the recent trend toward universal default clauses has slowed down, there are still many cards with these terms in place. Wise financial practices will decrease the likelihood that you will fall victim to these exorbitant fees.

The best way to avoid suffering from is to pay off your debt. Work out a budget that allows you to pay more than the minimum payment on your cards each month, and stick to it. Don't use your cards more than you have to, especially if you have the tendency to spend more freely when using a card. If you have no debt you will not need to worry about these interest rate hikes.