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Did you know? Credit card "Universal Default" could cost you thousands

Did you know that many creditors are now accessing your credit information on a regular basis, and increasing your interest rate when you are late on any account? That's right, if you pay one credit card or your car loan or mortgage late, the interest rate on one or more of your other credit cards could go up.

Credit card companies are including this "universal default" provision in their updates of cardmember terms and conditions mailed to their customers, as well as in the terms and conditions for new customers. If you don't read the fine print, you won't know they can do this until it's done. Here's where to find it in the typical cardmember agreement terms and conditions (relevant phrase bolded here for emphasis):

"Your APRs may increase if you default under any Cardmember Agreement you have with us for any of the following reasons: we do not receive at least the minimum payment due by the date and time due as shown on your billing statement for any billing cycle for which a payment is owed, you exceed your credit line on this Account, you fail to make payment to another creditor when due, you make a payment to us that is not honored by your bank."

Unfortunately, if one of your current creditors has this policy and invokes it because of a late payment to another creditor, the only thing you can do is try to prove the payment was actually received before the due date - a very difficult thing to do. So the best action is prevention.

Make sure all of your payments are sent early enough so they are received at least 3 days before the due date, to allow for processing of your payment. Or pay electronically using on-line banking, or automate your standard payments such as your mortgage or car loan through your bank.

And always read the fine print - if your current credit card company has this provision, seriously consider changing companies. If you are applying for a new card, don’t apply with a company that includes this provision in its terms and conditions.