In an effort to protect their money, the credit card companies are getting more and more aggressive. Many companies have started inserting ‘universal default clause’ into their agreement. So even a smallest mistake of not paying your library dues in time may be looked upon by them as your big sin and you may face serious consequences which may threaten your financial life.
When you are offered a new credit card, you are not eager to read the terms of agreement carefully. You just sign below them and send the papers back to the card issuer. Remember, almost all the credit card companies are now including a dangerous clause in their agreement – universal default clause.
To put it in simple words, if you make even a small mistake of not paying any of your bills within 30 days, your card company may use that reason to label you as a defaulter. On that basis, they will be able to play with the terms of your credit card. They can hike the rate of interest, fees and penalties. The interest rate may even double.
There are many such ‘small causes’. If you are moving out of U.S. or provide a mailing address which is not located in U.S., that is a good reason for the card issuers to make their terms harder. If you are exceeding credit limit on any one credit just by a fraction that may be considered as a sign of your incompetency by all others!
You may think that if you are late in making payment for one credit card, the other credit cards should not be affected. They should not even know about it. However unfortunately this is not true. Credit card companies regularly check your credit report. If they find any such delinquency in any your account, they will promptly act on that basis. If you try to argue with them, they will simply tell you about the universal default clause.
The effect of this clause will be harsh in the years to come. You may not be able to get good mortgage terms. The auto loans may get tougher. There may not be any pre-approved lucrative offers to you.
It may not be convenient for you to refuse signing on a credit card agreement which contains universal default clause. You have to live with it. However, you can take the following precautions to jump over such trap -
1. If you receive a pre-approved offer, you should not rush to accept it. You should read the fine print. If there is a universal default clause there, think whether you really need that card. Once you sign such agreement, it becomes binding on you by law.
2. Regularly monitor your credit card accounts. You should be able to keep track of the payment due dates.
3. If you are disputing any charge, it is better to contact immediately to the creditor and get the things sorted out. There is no point waiting up to the time the account is sent for collections.
4. If the due date for payment on any of your credit card is not convenient to you, you should contact the card issuer get it changed so that you are comfortable with it.
5. If you have enough money, you should not wait for the due date. Instead, you can make the payment as soon as the bill is received.
6. If you do not have money to pay the bill on time, it is better to contact the creditor and makes some arrangement for payment.
7. You may consider the option of an automatic and electronic payment of your bills to get peace of mind.
If you miss out a payment, it may not be a big thing for you. However your card issuer may not think in the same way. Your late payments may continue to harm you for months or even for years!
Credit cards have become a part of life. That is why you should maintain them nicely. If you are unable to make payment of your dues in time, it will affect you in several ways. But now even if you miss out any other payment, you may be playing with your financial life. This is due to universal default clause. What is it exactly? Chintamani Abhyankar shows the dangers of universal default clause in this article.
About the Author
Chintamani Abhyankar, is an expert in the field of finance and taxation for last 25 years. He has written many books explaining inside secrets of the magic world of finance. His famous eBook Stop donating your money to IRS which is now running in its second edition, provides intricate knowledge and tips on personal income tax.