Credit cards for bad credit: Beware of the universal default clause

Defined: is a practice in which credit card companies use to increase your interest rates for self protection. The lender changes the terms of credit card from the current terms of a credit card to the default terms. The reason they can justify this change is based on the default terms which basically states you are a credit risk if you are late in your payments or are determined to be a bad credit risk. The kicker to all of this is: if your credit score drops just simply because you have recently had several companies run credit checks (refinance, car loans, home equity loans, and so on) which dropped your credit score; the credit card company can use this drop to increase your rate even if you have never been late on a single payment.

If you have a credit card which has been defaulted with another lender in the past; it can still be used against you at any time in the future. The sad part is you can do everything right to get back on track to financial freedom and be penalized by the universal default clause.

Believe it or not this can happen: You can default with a lender and clear up all problems with that lender and position yourself in current or good standing, another creditor can find out raise their rate and start a chain reaction among all of your existing credit cards rates.

With so many credit cards for individuals with bad credit you must be selective when choosing your credit card provider. In today’s society many individuals carrying high balances on multiple credit cards and or miss payment due dates; either of which can cause the credit card companies to kick in their universal default clause for protection.

A creditor’s point of view is if you could possibly be a credit risk; they are not going to take a chance. If they raise their rates right now they will make their money back at a much faster rate and turn a profit at a much faster rate.

Solutions: First of all if you have the potential to have this clause enacted on your credit card do to high revolving credit cards or previous late payments, or previous default issues then you need to reed each credit cards “terms” and see if the “universal default clause” is an option for the creditor.

If it is an option, your next step is simple. Do your research on available credit cards and find either a 0% interest credit card or a low fixed rate credit card which does not have the universal default clause in their terms and transfer your balance to it. You will start paying less and be proactive in preventing future increases on your credit cards. Just remember you can have a great payment history, and never defaulted in your life and have the universal default clause applied to your account.

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