Universal Default Clause

Universal default is a fine-print item that is part of many credit card contracts. The universal default clause is triggered when a credit card customer who has otherwise had a good credit rating, has a negative show up on his/her credit report (such as a late payment). One late or missed payment may trigger not only late fees for that account, but may trigger increased interest rates on other credit accounts. In essence, the universal default clause means that if you are in default on one account, you are in default with other accounts too.

The universal default clause typically appears in credit cards agreements under the section titled "Other APRs" as the default rate. One credit card agreement states: "Your APRs may increase if you default under any Card member 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 the Account, you fail to make payment to another creditor when due, you make a payment to us that is not honored by your bank."

In order for payments to be processed on time, you should mail in your monthly obligations at least a week prior to the due date so that the payment can be processed by the due date.

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