THANKS TO UNIVERSAL DEFAULT - Those Overdue Library Books Just Raised Your Credit Card Rate

Credit cards are great things to have if you never carry a balance into the next payment cycle, and if you always pay before the due date. If you are like most of us, however, you run the risk of being unknowingly victimized by predatory lending practices.

Credit card companies are by and large subsidiaries or affiliates of major financial institutions. They have tremendous political clout at all levels of government, and that influence is reflected very accurately in federal and state laws designed to protect the interests of the credit card companies over the consumer.

How would you respond if the manager from your local grocery store showed up at your door on Thursday demanding that you come up with the extra money for Wednesday's price increase for the steaks you bought on Monday? Ridiculous scenario, right?

Credit card companies do it all the time. The fine print in your credit agreement gives them the right to change the terms on past purchases for any reason and often for no reason at all.

Remember that parking ticket you forgot to pay? The overdue library books? What about that envelope with the installment payment for the patio furniture that sat forgotten and unpaid in your glove compartment for five weeks? If they have been reported to a credit bureau your wallet is in the crosshairs.

Each of those events, and a dozen others like them, is a perfectly legal reason for the credit card companies to raise the interest rate on your card balances even when you have paid the credit card companies on time, like clockwork, for as long as you have had the cards.

This predatory practice is called a "universal default" provision. Consumer groups that monitor credit card company practices reported that almost half of all domestic card issuers included universal default provisions in 2005, with the number of predatory issuers expected to again increase in 2006.

It is not just late or missed payments with other unrelated creditors that can trigger universal default. An unrelated but adverse change in your credit score can also trigger the credit card universal default provision. Remember those store credit cards you got when the new mall opened? Those applications could have dropped your credit score enough points to raise the interest rate on your existing credit cards.

Makes you mad enough to fight back doesn't it? Sorry, but the pre-dispute binding mandatory arbitration provision in your credit card agreement already put you down with a TKO in the first round.