Steve Martin

Most people who use credit cards are not aware of the “universal default” clause. This clause is located in the fine print of most credit agreements. Basically what the universal default says is that if you, the debtor, are late on any monthly payment reported to the credit bureaus, you could be considered a credit risk and could have your interest rates with unrelated credit cards. So going one month behind on your car payment could raise the rates on all of your credit cards.

Universal default should be taken very seriously. One mistake or unforseen emergency that could cause a derogatory remark on your credit report could mean you having to pay out hundreds in some cases thousands more in interest a month. The people at most risk are the ones who have large amounts of revolving credit card debt, and rely on their lower interest rates to make ends meet each month.

It is most likely that in the near future every credit card will have the universal default clause. The scary part is that there is no warning to an increase in the interest rate. Plus the clause is written in a manner that is very hard to understand correctly, so most people are not even aware of this potential financial disaster. It can be financially devastating to have your interest rates go to over 25%. The best advice to avoid this situation is to manage your bills extremely well, and never go late on anything.

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