Universal Default Impacts Credit

WHAT IS “UNIVERSAL DEFAULT” AND HOW CAN IT IMPACT YOUR CREDIT CARD AGREEMENTS?

Universal default used to be when a credit card issuer would adversely change the terms of a credit card account because either the holder’s score dropped due to a missed payment or defaulted on an unrelated credit obligation. If a credit card issuer saw this happen they used to be able to hike up the interest rate to the “default” rate (which could be up to 30%) on both existing and future balances.

However, since the 2009 Credit Card Act credit card issuers are more limited regarding universal default practices. If they view your credit and notice delinquencies with other creditors they can no longer increase your interest rates to a high default percentage retroactively but there are other consequences that can and do occur. Customers who miss payments with another, unrelated lender may experience lowered credit limits, increased interest rates on future purchases, and even account closings.