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Say goodbye to universal default

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Say goodbye to universal default

What is universal default and how did the Credit CARD Act address it?

There once was a time, not long ago, when the interest rate on your credit cards could shoot up for seemingly no reason. One of the situations that could trigger a sudden and permanent increase in finance charges and annual interest rate was universal default.

Universal default was triggered when consumers had a new, negative mark on their credit report due to a late payment on any credit card, utility or loan they had.

With the introduction of the Credit CARD Act of 2009 into our collective consciousness, we now know that the increase of an annual percentage rate or finance charge on an outstanding balance is forbidden except under special circumstances.

Now a credit card company cannot increase your interest rate unless you are 60 or more days late in making THEIR payment. In addition, they can only impose that increase for six months as long as you pay as agreed during that six-month period.

This means that not only are these ‘fines’ imposed based solely on your activity with each individual lender, but they also have a maximum period of effectiveness. When comparing this to the 30-days-late universal default which could go on forever, this is a nice change of pace.

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