Credit Card Lowdown: Avoid credit card rate hikes

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Avoid credit card rate hikes

In a study by Consumer Action, a consumer advocacy group, credit card companies were found to be hiking interest rates for all consumers including those paying on time. Those facing financial problems as well as those not doing so, are charged higher interest rates on credit cards, thanks to the universal default policy.

The implication of the universal default clause is that the issuer has the right to raise your interest rate in case of late payments or accumulating excessive debt. The logic behind this is the likelihood of the customer being a greater risk to the bank.

Some of the reasons for the default rate being applicable to your case include worsening of credit score, late payments on mortgage and car loans, exceeding credit limit, bounced checks, excessive debt, excessive available credit, new credit card and inquiries about car loans or mortgages. Even disputes of medical bill payments can be basis for universal default. Universal default translates into a drastic increase in your overall debt.

Apart from universal default, banks also charge higher annual fees, cash advance fees, bounced check fees, overdraft fees and shorter due dates. Credit card info.com reports:

Understand the universal default interest rate and how it can hit your wallet. NEW YORK (CNNMoney.com) - Credit card issuers are upping the interest rate you pay on your debt even if you pay your bills on time, according to a study from Consumer Action, a consumer advocacy group.

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December 9, 2005 in Tips & Advice | Permalink