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November 25, 2004 05:57 AM

One Late Payment Can Hit Finances Hard


Excerpt: Almost half of all credit cards have so-called universal default penalties, which allow the credit-card company to increase your interest rate if it discovers a late payment on your credit report for any credit-card account or loan or other debt involving any other company. It doesn't matter if you've never made a late payment to that particular company.


One late payment on your credit card can pack a pretty hard punch. Not only with fees and rate hikes on the card in question, but also with penalties on your other credit cards.

Almost half of all credit cards have so-called universal default penalties, which allow the credit-card company to increase your interest rate if it discovers a late payment on your credit report for any credit-card account or loan or other debt involving any other company. It doesn't matter if you've never made a late payment to that particular company.

This year, 44 percent of credit cards have universal default penalties, reports Consumer Action, a San Francisco-based research group. And the number is increasing -- only 39 percent of cards had them in 2003.

Penalty rates can easily top 29.99 percent compared with the average annual rate of 14 to 16 percent. These penalties go into effect when you are perceived as a delinquent borrower, usually after you make a late payment or go over your credit limit.

You might also incur penalties if your credit score drops, warns Experian Consumer Direct, one of three credit bureaus that calculate your credit score. Your credit score is an analysis of your past credit history that is used by lenders to figure out how much of a risk you are.

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Read all 21 posts in the same category of Credit/Credit Card:

Citigroup Says It Will Issue American Express Cards - Dec 17, 2004
MBNA Pitches Rival Visa Card - Dec 14, 2004
Credit Card Loyalty Put to the Switch Test - Dec 09, 2004
Credit Cards Offer Safety In Buying Online - Dec 06, 2004
How to Deal With Your Debts - Dec 04, 2004
FACTA & Your Credit - Dec 03, 2004
Warning On Internet Loans - Dec 02, 2004
High Court Sets Truth In Lending Limit - Dec 02, 2004
Free Credit Reports May Reveal Surprises - Dec 01, 2004
Free Credit Reports Coming, With Pitches - Nov 30, 2004
Teens Need To Embrace Identity Protection - Nov 30, 2004
What to Do About Your Credit - Nov 29, 2004
A Generation Weighed Down By Debt - Nov 28, 2004
7 Ways to Improve Your Credit Score - Nov 25, 2004
Free Credit Report Details Announced - Nov 25, 2004
Free Credit Reports Are On The Way - Nov 23, 2004
Card Debt - Nov 22, 2004
Soaring Interest Compounds Credit Card Pain for Millions - Nov 20, 2004
Gas Cutter - Nov 02, 2004
Payment Rates - Nov 02, 2004