Chase has announced that they will be ending the universal default penalties on their credit cards as of March 2008. Citigroup has already announced they would end this practice earlier in the year.
Credit card companies have started using universal default penalties in the past few years to raise interest rates on potentially risky clients. By having a universal default clause in your credit card terms, you can suffer from a very high interest rate by paying late on another account, paying no more than the minimum amount several months in a row, or other similar behaviors.
This type of penalty allows the credit card company to raise your interest rate for almost anything and makes it hard to protect against. Even if you are only falling behind on one credit card, all credit cards even with other companies could be affected.
After receiving scrutiny because of this practice, the credit card industry is stepping away from it. While this is definitely good news for consumers, you still may have credit cards with companies who have not discontinued use of universal default clause. It is important to know and understand the terms on your accounts so you will know if you could suffer because of this.
Another way to avoid the universal default penalty altogether is to make sure you are paying all you bills in a timely manner. Pay at least $5 over the minimum amount required in order to avoid being targeted as a "slow pay." Staying on top of your bills is the easiest way to avoid the highest credit card rates.
If you are having a hard time paying your credit card bills, seek help from an accredited credit counselor. The counselor can show you what options you have to get back on top of your credit card debt, including strategies you can do on your own.
Ronnica Rothe is a graduate with honors from the University of Oklahoma and a current student a
