Universal Default Clause
I admit it. I read all of those silly credit card offers I get in the mail. I analyze them all the way from the marketing tactics down to the small print disclosures. My goal is to find out how these unsolicited offers are trying to get me.
I sound paranoid, don’t I? Well, I am but I have good reason to be as evidenced by the term Universal Default Clause.
The Universal Default Clause sounds innocuous enough. We all know about those default interest rates that you can get slammed with if you are late paying a credit card. You have your nice 9.99% interest rate on your favorite credit card. You then make a single late payment to that credit card and are now paying a 29.99% or more interest rate.
The Universal Default Clause makes the stakes a little more serious. You no longer need to make a late payment to your favorite credit card company to get slammed with that outrageous interest rate, simply making a late payment to anyone will get you. Late with the phone bill? Watch your credit card interest rates skyrocket. Also, the Universal Default Clause can kick in if your credit score drops, no late payments required. Applying for new credit? That can ding your score and trigger the Universal Default Clause.
Many credit card companies will monitor your credit monthly to see if you’ve slipped up and are now deserving of Universal Default. This is something to keep in mind the next time you check your credit reports and see all of those inquiries from companies you already do business with.
When you get updated terms or disclosures from your credit card company or are considering a balance transfer with an awesome rate, take a look and see if the Universal Default Clause is out there trying to get you.
To end this on a more positive note, I recently received updated terms from Chase and they were actually REMOVING the Universal Default Clause. The credit card industry has received a lot of bad press about the Universal Default Clause. Hopefully, more creditors will follow Chase’s lead.
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