When you decide to apply for a credit card, there’s a lot of fine print to read through. You’ll find information on the promotional time period, APR, annual fees, and more – but you might miss the information about universal default.
A Closer Look
The term “universal default” refers to a commonly practiced credit card tactic among issuers, which allows them to increase the interest rate of a cardholder should there be any change in risk profile. While this sounds fairly straightforward, universal default terms and conditions may be surprising.
Under this practice, credit cardholders failing to make timely payments to other creditors when paying utilities, landlords, mortgage lenders, and other credit card issuers may see their rates raised. Even if you don’t default on the loan itself, universal default will come into effect by activities on other accounts.
While this practice may seem unfair, the creditor will argue that you’ve become a more significant risk to the company; as such, the creditor must be compensated. Notably, however, credit card companies can no longer increase the rate on already existing balances. New, higher rates can only be applied to post-default purchases.
If you are struggling with universal default or if you fear this practice may apply to your current credit card debt, credit counseling or consulting with a bankruptcy lawyer in Dallas can help. While it’s a good idea to avoid using a card with a universal default clause, it’s also important to note that credit card issuers can change the terms of agreement on your account whenever they feel like it.