Universal Default

Nowadays, many credit card companies have started using the "Universal Default" clause while signing the agreement with the consumers. This clause allows them to raise the rate of interest no matter if you are late to some other creditor also.

"Universal Default" mentioned in your credit card agreement clearly focuses on the point that if you are more than 30 days late on any payment to anyone, there will be a rise on the rate of the credit card interest and this will damage your credit scores dramatically.

Experts are focusing on this issue and they have seen it reaching an all time high. It is reported that most of the credit card issuers act on these clauses regularly. This rule is applied to those customers who have no late payments on their own card also.

The clause of "Universal Default" is hurting the credit files of the consumers at an alarming rate because they somehow are unaware of the dangers arising due it. This may be due to the fact that they either fail to read the clause or that they don't understand the credit card agreement. If a consumer is even one day late on any payment to any of his creditor, he will be subjected to a default rate as high as 29.99 percent on many others.

These types of clauses usually come with those agreement deeds that offer zero percent financing. Unfortunate enough, many of the consumers fail to understand it and steer them up to a financial chaos.

The credit card companies usually go through the credit report of its customers every month, some are reviewed quarterly, some yearly and some are never done. Those customers who have made late payments are easily within the reach rather than those who always pay on time.

ICFE (Institute of Consumer Financial Education) is receiving calls of the distressed consumers at an increasing rate complaining about this ‘Universal Default' thus leading to rise in the rates of interest on their credit cards – without explanation or advance notice. This further lowers the credit scores.

The consumers can try to prevent this from happening by meeting all the monthly obligations not just on time, but at least a week or more ahead of the payment due date. It will be a very beneficial habit if you can pay off your dues once the bills are received.

Fixing this problem is not that easy because once negative information hits your credit report, the damage is done. In order to get it removed, the consumer has to convince the creditor that it was not his intention to delay the payment giving some genuine reason. It is therefore very important to send the payments through certified mail so that the date of receipt can be tracked.

Here are some of the tips to avoid “Universal Default”

• If there is fairly large credit balance, ensure that it has a low fixed rate of interest. Also see if there is any risk of universal default tucked in it.
  
  
• It is very important to go through each bill every month along with the due dates that is mentioned.
  
  
• If you decide to dispute on a particular bill, make sure that you take actions promptly. Do not wait until your account is sent to a collection agency.
  
  
• It is very necessary to keep accurate lists of the credit cards, balances, limits, interest rate and payment due dates.
  
  
• You can also contact the credit card company to change the due date so that it falls at a convenient time of the month for your lifestyle.
  
  
• It is a very good habit to pay the bills once it reaches you rather than waiting for the due dates.
  

Before you shop for credit just like for any other major purchase, you need to research on the following avenues:

• Research all the available options
  
  
• Weigh all the costs and benefits
  
  
• It is very important to read all the details before you enter into any financial agreement.
  

Regards
Roxette