UNIVERAL DEFAULT

You may have found a sudden, unexplained hike in interest rates on your bills from credit cards companies. This may be due to practice, known as "universal default" or, some creditors call it, "premium pricing". In a nutshell, universal default means that if you are late paying a bill, your credit card company can raise the interest rate on your card - even if the payment was to another creditor. The late payment and rate hike can also cause your credit score to go down, creating further credit problems. What most triggers universal default clause are:

- Decrease in credit score
- Late Payments to other creditors, car loans, or mortgage
- Going over credit limit
- Having a payment check returned (bounced)
- Too much debt
- To much available credit
- Getting a new credit card

Even making an inquiry about car loan or mortgage can sometimes trigger a rate increase. Information about universal default policies is often buried in the fine print of a credit application or disclosure notice, and consumers don't always know to look out for it.

Banks are not legally required to inform consumers when the default is applied.

What can you do?

- Be vigilant. Read the fine print before opening credit accounts, and pay special attention to the provisions of universal default policies.
- Shop around for credit cards that do not have this type of policy or whose increased rates are acceptable, should the default be applied. Know your options.
- Know your payment due dates and ask to have them moved to more convenient time if you have trouble getting payments out to creditors.
- Pay on time - a week in advance if possible
- Consider automatic payments for regular bills.

If a rate increase is applied under universal default, some banks will consider lowering the rate after a cardholder has demonstrated regular, timely payments and/or the credit score improves.