Ask the Debt Doctor: Universal Default

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I noticed on my last credit card statement that my interest rate had skyrocketed.  I pay the minimum payment on time each month, and when I called to question the bank that issued me the card, I was told that because I had been late on other bills, I was considered a higher risk and my rate was increased.  Is it legal for banks that issue credit cards to do this?

– Skyrocketing Interest Has Me Steaming, Latrobe

Dear Skyrocketing Interest Has Me Steaming,

Read the fine print.  Every month when you get you statement from the bank by sending your payment you accept all the conditions they so cleverly hide in the fine print. In most cases, the bank will include a “universal default” provision. By accepting a “universal default” provision you allow you bank raise your interest rate automatically if you’re late on other payments — such as on another credit card or a house payment. The bank believes it is reasonable to raise rates when you are in default on any obligation, because they may be next.

If you have been the victim of a universal default or have significant credit card debt this could be an indicator that you should schedule a consultation with a bankruptcy attorney.   Filing for bankruptcy relief usually isn’t the result of spending sprees.  It’s more commonly triggered by job loss, medical problems, or a divorce. But, those hit by any of these misfortunes often turn to credit cards to stay afloat. If you have trouble finding new sources of income or an illness keeps you off the job, debt can accumulate quickly, especially if the interest rate is high.

As a debt relief agency, The Debt Doctors help people struggling with debt file for bankruptcy under the bankruptcy code. If you have questions about financial recovery…ask The Debt Doctors. We pride ourselves on providing honest answers for people confronted with credit card balances, medical bills, foreclosure, past due taxes or other significant debt. Call one of our experienced attorneys for a consultation. There is no charge or obligation and it is completely confidential. Contact us today and let us help you prepare yourself for life after debt.

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