What is the Universal Default Clause?
Another increasingly common stratagem among credit card companies is the “universal default clause.” Under this fine-print term of the cardholder agreement, even if a consumer makes his credit card payments on time, the card issuer can raise the interest rate automatically if the consumer is late on a payment to someone else – anyone else. An overlooked utility bill, a late payment on a magazine subscription, just about any delay can trigger the “universal” default clause. Indeed, even securing a loan from a different creditor can trigger the universal default clause because the card issuer may “find” that the consumer is less likely to pay his credit card bill if he incurs additional debt.
