Credit Cards: What is the Universal Default Clause?

Most people who carry major credit cards are well aware that the interest rates associated with them tend to be higher than for other types of lending, such as home or auto loans. Anyone who has paid their credit card bill late more than once or twice is also aware that doing so may cause the interest rate on their card to go up sometimes by quite a lot. Many credit cards carry interest rates of as much as 20% or 25% annually, and customers who want to avoid interest rates in that range make an effort to pay their bills on time.

What many people do not realize, however, is that up to one third of all credit card issuers now include what is known as a universal default clause in their bills. This information, usually disclosed in the tiny print on the bill that few people bother to read, indicates that the interest rate on your credit card may be increased if you pay bills late to other lenders, even if you pay your credit card bill on time.

This means that paying any bill late that could show up on your credit report, such as an auto payment or a utility bill could cause your credit card interest rate to go up. This, in turn, could hurt your credit score. There is currently nothing in Federal law that prohibits this practice; the law only requires that lenders disclose it in writing. Credit card companies justify this by saying that customers that make late payments to anyone increase the risk for all lenders. Nevertheless, many, if not most, credit card customers are unaware that such policies exist.

Not all credit card companies have such a policy; in fact, most do not. Customers who are not interested in having the interest rates of their credit card tied to their ability to pay their phone bill on time would be advised to read the fine print in their credit card statement. If such a policy exists, you could either complain to your credit card issuer about it or shop around for another credit card. The lesson to be learned here is a valuable one when you receive your credit card bill or a notification that your credit card billing terms have changed, take a moment to read the fine print.

Copyright 2005 by Retro Marketing. Charles Essmeier is the owner of Retro Marketing, a firm devoted to informational Websites, including End-Your-Debt.com, a site devoted to debt consolidation and credit counseling, and HomeEquityHelp.net, a site devoted to information regarding home equity loans.

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Enlightening Students About Credit

This is truly the age of plastic money and credit card companies. They are appealing to all kinds of people as well. If you thought that credit cards were only available to full-time employees, think again. Credit card companies are starting young these days. What is their target? High school and college students, of course. As it turns out, if you are a student, you can avail of a credit card. In fact, that is the only time when you can obtain a credit card despite being jobless. And college students love the fact that they can spend as and when they like.

Now that we have established that credit card companies are increasingly targeting increasingly younger people, one question arises: How will they be attracting the students? Well, student credit cards are marketed differently from other kinds of credit cards. In these cases, the credit cards come with a bunch of teasers that make it simpler for students to afford the card. Thus, there may be interest-free periods. There may be a very low interest rate. After all, students do not have a terribly stable income. To land them with an unnecessarily expensive credit card offer would result in no takers.

However, this is not to say that student credit cards are absolutely flawless. Of course they do. For instance, defaulting on credit card payments could result in the suspension of all the bonuses that were being given. Default just once and that unbelievably low interest rate can reach almost thirty percent. Moreover, students are not necessarily known to be very good at managing their money. In fact, when we think about groups that tend to waste their money, the image of students is one of the first that emerge in our minds. Moreover, living away from home can result in higher expenses which the student may face difficulty in paying for.

Sometimes there is no escaping from the accumulating credit card debt. However, if you are a student with a newly-acquired credit card, tell yourself that you will restrain the urge to spend more than is necessary. Using your credit card prudently is the best way to make sure that you do not get trapped in the web of credit card debt. Remember that once you do graduate from college and get a full-time job, you will have several other bills to pay. At such times the burden of credit card debt would be the last thing that you would want.

Start out with a credit card comparison, then get yourself the best balance transfer credit cards. Visit us at http://www.cardguide.co.uk/.

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