Credit Card Fine Print Can Cause Debt Disaster
'Universal Default' Catches Consumers By Surprise
UPDATED: 2:58 pm EDT May 2, 2005
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SAN ANTONIO -- Many credit card customers are in for a nasty surprise if they're late paying a bill -- any bill.
A clause that credit card companies are inserting into the terms of agreement allows them to increase your interest rate if you are late paying another creditor's bill, according to KSAT-TV in San Antonio.It's called 'universal default' -- a default on one payment that triggers higher rates on other outstanding loans.About half of credit lenders now use the clause that's usually in the fine print of the credit card agreement, the station reported.It allows them to raise your interest rate up to 29 percent if any late payment shows up on your credit report, even if your payment history is perfect.It happened to Margarita Spindola, who saw the interest rate on her credit card shoot from 9 percent to 25 percent after she made a late payment."Oh, I was shocked," said Spindola. "They almost tripled my payment."The banking industry defends universal default as a necessary protection against risky borrowers.Consumers who are caught in the "universal default" clause can call the credit card company to try to negotiate a lower interest rate.They can also transfer the balance to a lower rate card.The best advice is to always pay your bills on time.
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