R.I.P. Universal Default
| June 8, 2009 |
Did you know that even if you make your credit card payments on time, issuers can raise your interest rate if you’re late on other payments. Is this because they feel you are more of a risk? If this has not happened to you yet, consider yourself in the minority and keep a close eye on your bill.
As many people have found out during the last few months, no reason or explanation (at least one that makes sense) is needed to have your interest rate doubled or even tripled. Otherwise known as the “Universal Default” clause found in the terms and conditions section (aka small print), issuers use the universal default as protection if they have a reason to believe that their risk of being repaid has increased. The problem here is that issuers feel this is not unreasonable.
But with a recently signed Credit Card Accountability, Responsibility and Disclosure Act maybe those days are a thing of the past; or at least the part of issuers raising your interest rates for no reason or warning. Under the new bill credit card issuers will have to notify cardholders 45 days in advance of any impending rate hikes. The reasoning is that this will help credit cardholders plan in advance and give them the ability to arrange funds accordingly.
In my opinion this does help in some ways, as it gives notice before hand, but a bigger concern is what the starting interest rates will be and how high will interest rates be able to rise for cardholders that are issued new cards after the Card Accountability, Responsibility and Disclosure Act is in effect.
Have you been hit with increases in interest rates? If so, what was the reason behind it?
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