Comments on: Deceptive Credit Card Offers, Part 2: Universal Default

By: MoneyDummy

MoneyDummy — Thu, 08 Jun 2006 22:28:15 +0000

When I first heard about this practice I too was enraged, and I’m still not sure I’m in favor of it.

However, since Mr. MoneyDummy has been on the other side of the financial desk, he’s pointed out that there’s often good rationale behind universal default: when people’s credit ratings begin dropping heavily, banks stand to lose if the person goes bankrupt. They raise the interest rates to try to get just a little bit more money before that happens. In many cases, they know they’re never going to get their money back; universal default is an attempt to mitigate their losses somewhat.

By: Steven

Steven — Wed, 07 Jun 2006 17:43:31 +0000

That is absolutely reprehensible, and I had no idea that credit cards were utilizing this practice.

Thanks for the heads up!

By: brett

brett — Wed, 07 Jun 2006 14:41:48 +0000

Flexo what a great series of articles to include in your blog. Hopefully lots of people will read them and link to them.

Universal Default seems to me like a nice example of how the rich are separated from the poor–it brings an “all or nothing” aspect to credit card debt.

I understand why credit card companies employ it, but it does seem excessively punitive. Presumably if enough people hate it, then a company will come out that does NOT use it, and everyone will flock to that card. That’s a long-term economist’s view though.

By: Martin

Martin — Wed, 07 Jun 2006 13:50:29 +0000

So, I pulled my annual freebie credit report recently and saw over two dozen ’soft-inquiries’ from Discover card (about one per month). I assume this was A) Checking on universal default, or B) Quickie credit check before they mail me another three pounds of ‘convenience checks’ each week.

Anyone else seen this? Know what it is?