Reply #40: Just FYI - Credit card definition for "default" is complete and utter bullshit. [View All]

[SmileyRose]

For me personally the rate increases were meaningless. I have never carried a balance and have never paid interest. I've been fortunate in that back in the dark ages of mail in a check the post office never once wandered off with it. My payments have always been early and for the full balance due.

However, according the credit card rules - and this is for all mega-banks and most smaller banks - "default" means if any of your creditors reports to any credit bureau that you have ever been even one day late then the credit card company has you nailed with the default rate. You do not have to be late with your credit card payment.

That's right. You can consistently pay your credit card 2 weeks early but if you cancel your monthly autobilled gym membership and they screw it up and report you as even 1 day overdue to Equifax then every credit card company declares you in "universal default" and smacks you with the highest rate they can dream up.

I know someone who was a saver but after a serious car accident was out of work for 16 months and ran through savings and started having to put medical care costs on the credit cards. It did not take long to max out 4 cards with a total of $36 grand balance due. Her sister was kind enough to make the minimum payments until she could get back on her feet. She got back to work, paid her own minimums, paid back her sister, and started putting everything she could toward the credit cards. She had her car payment on auto bill on an account specifically set up for that. The car was paid off but the next month the bank "accidentally" ran the auto bill and, of course, it NSF'd. They reported to Trans Union and within a week she had letters from ALL FOUR credit cards that she was in universal default and the new rate on her nearly $36 grand was 27-36% (all 4 cards jacked up in that range) when her previous ranges were 6.9% to 9.9% - she was basically forced into bankruptcy because not a chance in hell she could afford the new minimums.

Just a friendly reminder to all who read this, don't carry a balance, and if you are - do everything you can think of to throw money at the balance due. Even if it means taking in boarders or moving into Aunt Josie's basement to have the money to do so. These banks have no heart and no shame.