About Universal Default

What is universal default?

Universal default is an important term to watch out for when dealing with credit cards. Universal default permits a credit card company to increase your interest rates (or change your rates to the default rates) associated with that account because of negative information associated with any credit card or loan that you.

The universal default clause states that the company can increase the interest rate that they charge on the credit card account should the consumer fail to pay any of their bills on time. This includes credit card accounts with other companies, electric bills, telephone bills, and more.

Let’s say, for example, that you make a late payment with Credit Card A. Credit Card B may be able to increase your interest rates (if Credit Card B has a universal default clause), even though you have made all payments on time to Credit Card B.

Universal default can occur when certain actions take place, including (but not limited to):
- Making a late payment
- Exceeding your credit limit
- Having too much debt overall
- Having too much available credit
- Applying for credit too often

Since many consumers are often faced with paying at least one of their bills late each month, this practice could pose serious ramifications for those consumers who fall victim to it. The best strategy for avoiding this unfavorable practice is to read the fine print on all of your accounts. If possible, only sign up for credit card accounts that do not make use of the universal default clause.

Universal default is not practiced by all credit card companies, so you can choose to avoid these types of cards. Be sure to carefully read the terms and conditions of any credit card or loan that you apply for, and avoid financial products with universal default clauses whenever possible.

For more detailed information on all aspects of credit cards, visit our credit card articles and/or our credit card faqs center. Turn our knowledge into your knowledge.

Posted in Credit Cards, Loans, Miscellaneous, Personal Finance

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