Those who have significant credit card debts can experience issues due to high-interest rates. Needing to pay interest on top of the initial debt can make it impossible for many people to gain control over their finances.
If you are suffering from overwhelming credit card debts, you should take the time to understand certain terms so that you can use your knowledge to gain control over your situation. The following is a brief overview of universal default and how it can affect debtors.
What is universal default?
Universal default was a very common practice before the CARD Act (Credit Card Accountability, Responsibility and Disclosure Act) was put into place in 2009. It is essentially the practice of a creditor increasing your interest rate because you were late to pay another creditor. This was a very controversial practice because it meant that those already suffering from debts were put in an even worse position.
Did the CARD Act put a stop to universal default?
The CARD Act did not make universal default illegal, and it can still be used today to some extent. However, it did put a stop to the abusive practices of lenders that had become common. The CARD Act means that credit card issuers cannot increase your interest rate unless you are more than 60 days late on the payments to that account. However, credit card issuers can still choose to increase interest rates on charges in the future.
If you are worried about your credit card debts, and you don’t know how to manage them effectively, you should consider your options regarding debt elimination strategies.