The New Friendly Face of Credit – The Wolf behind Sheep’s Clothing

Congress has been coming down hard on the credit card industry for their use of the universal default clause. This is a clause in your credit card terms and conditions that you sign off on that gives credit card companies to ability to raise the default credit card rates as high as 32% if they determine that you have become a risk.

Chase has just recently announced their clear and simple plan. They are eliminating this practice as of March 2008. In a Dallas Morning News article, Capital One states that they raise a consumer’s rate only "if they pay us more than three days late twice in a 12-month period."

A spokeswoman for Bank of America said, "We do not engage, and never have engaged, in the practice of universal default for our consumer credit cards based on the customer's failure to repay obligations to other creditors."

So are credit companies really becoming more consumer-friendly? Not really.

Bank of America says that they never have engaged in the practice of universal default. However, if you look at their terms and conditions, it says:

We reserve the right to change the APRs in our discretion.

Another company that claims that they don’t engage in the practice has this on their terms and conditions:

In the future, we may increase your non-introductory APRs if market conditions
change.

I would define universal default agreement as the ability to change credit card rates for any reason. If you read the terms and conditions, they still reserve that right. They just don’t call it the universal default clause.

Remember, credit card companies just want the money that they make off of high interest rates, as well as the money that they make off of your mistakes. Be careful when a credit card company wants to be your friend.

My favorite is “a change in market conditions” – what about current credit conditions?

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