FreeStuffEngine.com - Universal Default ? Tips On Avoiding The Trap By Delia Galley

You?ve probably never heard of it, but it?s in your credit card agreement contract. We all read that barely visible lengthy finely printed jargon, don?t we?

?Universal default? refers to the credit card rule that allows a credit card issuer to raise your interest rate, at any point in time, if they believe that you are a credit risk. For example, if you pay late on credit card A, in addition to credit card A raising your interest rates, credit card B and C can also raise your interest rates. So how does the credit card company know that you were late on paying the bill for credit card A?

Your credit report tells all. Banks actively monitor your credit score to see, if your score has declined due to late payments, too many lines of credit, bounced checks, inquiries, etc.

It is estimated that approximately 44% of all credit card issuing banks have a universal default clause in their credit card agreement. This is an increase of 5% since 2003. The universal default clause has been in existence over the years but the rate at which banks are enforcing the rule has increased, in an effort to increase revenues. In addition, the universal default penalty has risen sharply and can land you an interest rate as high as 25%.

The scary fact is that you could buy a refrigerator at a 9% interest rate, only to find yourself paying an interest rate of 24.99% for the same purchase.

Here are some tips on avoiding the universal default penalty:

Understand your credit card contract. You don?t have to spend hours examining every finely printed word, but make it a point to scan the credit card agreement and rules, looking for special clauses such as ?universal default?. You can also contact your credit card company, if you do not understand any of the agreement terms.

Monitor your credit report on a frequent basis. You are entitled to three free credit reports per year according to the Fair Credit Reporting Act (FCRA) ? take advantage of them.

Fix credit report errors. If you find anything on your credit report that raises ?red flags? ? take corrective action and fix them right away. Your credit file may reveal accounts that you did not open and other identity theft related issues. You will want to fix these errors so that they do not affect your FICO score.

Pay all your bills on time. Online banking is a great way to ensure that your bills are paid like clockwork.

Credit
added July 9, 2006 You?ve probably never heard of it, but it?s in your credit card agreement contract. We all read that barely visible lengthy finely printed jargon, don?t we? ?Universal default? refers to the credit card rule that allows a credit card issuer to raise your interest rate, at any point in time, if they believe that you are a credit risk. For example, if you pay late on credit card A, in addition to credit card A raising your interest rates, credit card B and C can also raise your interest rates. So how does the credit card company know that you were late on paying the bill for credit card A? Your credit report tells all. Banks actively monitor your credit score to see, if your score has declined due to late payments, too many lines of credit, bounced checks, inquiries, etc. It is estimated that approximately 44% of all credit card issuing banks have a universal default clause in their credit card agreement. This is an increase of 5% since 2003. The universal default clause has been in existence over the years but the rate at which banks are enforcing the rule has increased, in an effort to increase revenues. In addition, the universal default penalty has risen sharply and can land you an interest rate as high as 25%. The scary fact is that you could buy a refrigerator at a 9% interest rate, only to find yourself paying an interest rate of 24.99% for the same purchase. Here are some tips on avoiding the universal default penalty: Understand your credit card contract. You don?t have to spend hours examining every finely printed word, but make it a point to scan the credit card agreement and rules, looking for special clauses such as ?universal default?. You can also contact your credit card company, if you do not understand any of the agreement terms. Monitor your credit report on a frequent basis. You are entitled to three free credit reports per year according to the Fair Credit Reporting Act (FCRA) ? take advantage of them. Fix credit report errors. If you find anything on your credit report that raises ?red flags? ? take corrective action and fix them right away. Your credit file may reveal accounts that you did not open and other identity theft related issues. You will want to fix these errors so that they do not affect your FICO score. Pay all your bills on time. Online banking is a great way to ensure that your bills are paid like clockwork.
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