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Paying Late Has Harsh ConsequencesDid you know that making a payment late to one of your credit cards can cause your other credit cards to also raise you interest rate? This is due to the “universal default” clause, which allows credit card companies to periodically examine your credit report and penalize you if you make a late payment to any of your creditors. The universal default clause can usually be found in your credit card agreement, buried among paragraphs of legal jargon, and basically states that if you are more than 30 days late on any payment to anyone, the interest rate on your credit card could rise. This clause is a growing trend among credit card companies, with more than one-third of major credit card issuers actively applying it to their credit card users. This means that consumers have to be extra careful to pay all of their bills on time, or else they will suffer the far-reaching consequences.Because many consumers do not take the time to read their credit card agreements before they sign up for a credit card, many of them do not realize that this clause is in their credit card agreement and that credit card companies have every legal right to use the universal default clause in order raise interest rates. A sudden rise in interest rate can seriously hurt those who carry high balances on their credit cards. For example, if you had a $5,000 balance on a credit card with a 14% APR and you paid a fixed $200 of your bill every month, at the end of your debt you will have paid $946.23 in interest charges. If that rate was raised to, let’s say 24%, and you still made the $200 fixed monthly payment, at the end of your debt you would have paid $2,000 in interest charges. A higher interest rate will increase the amount of time you are in debt and the amount of money that you will end up paying to the credit card company. That is why it is important to always read your credit card agreement carefully before you sign up for a credit card, and if you find a universal default clause think about looking for another card. If you already have a credit card with a universal default clause, try to transfer its balance to a credit card that does not have one. Make sure that the new credit card has an interest similar or lower to that of the previous card so that you are not killed by the high interest charges. Keep track of all your bills and make sure you pay them on time. It is recommended that you pay your bills when they arrive instead of waiting for the due date. That will ensure that your payment has plenty of time to make its way to the credit card company. Find out if you can pay your credit card bill online so that you do not have to wait for the mail to deliver your check. If you have a previous history of paying late, you should be even more careful that you do not make this mistake in the future. Credit card companies will review the credit report of those high-risk customers more often than those who have never made any late payments. Be aware of what bills you owe and when they are due. Make a schedule of when you will need to pay each bill every month so that you make sure you have enough money in your account and will not have to delay making the payment due to lack of funds. The subject matter contained in our educational publications is for informational purposes only. We suggest that you consult your financial or other advisors when planning for your specific needs or requirements.
Credit Report – Check Yours Regularly…and for Free In the twenty-first century, there are few documents that have a greater impact on the lives of Americans then their credit report. Credit rating determines one’s ability to buy a home, a car, or to obtain a credit card or a job. Since these things are important, it is equally important that the information be accurate. The only way to be sure of that is to check the report regularly. Prio. . .
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