San Diego, CA - ICFE issues a warning to all credit card
account holders in America. The credit crisis may now affect you
in ways you never dreamed of because Universal Default is now
reappearing in stealth mode. Universal default, you might be
asking yourself, what is that? Universal default is the term
used by issuers who look at their cardholder's history with
other creditors to take an adverse action against their own
borrowers. It is being revived by lenders who are looking for
methods to ward off bad accounts and at the same time these
adverse actions result in increased fees which lenders are using
more frequently to off-set those mounting losses.
New offers for credit are being drastically curtailed.
Charge-offs are increasing among card issuers across the board.
Banks, the major issuers of Visa and MasterCard, American
Express, Diner's Club and department store credit cards like
Target and Macys are all reporting increasing delinquencies and
thus being forced to write-off more and more bad debt.
The New York Times reported that lenders wrote off an
estimated $21 billion, (yes that is billions with a B), in bad
credit card loans in the first half of 2008 as more people
defaulted on their payments. Options used by borrowers before to
pay down credit card debt, such as home equity lines or being
able to transfer balancesto a new card have disappeared.
This retreat from new credit offers and expanding lines of
credit is even affecting creditworthy consumers. Gone are the
low-ball teaser rates and zero percentage rate balance transfer
offers. Lenders have been tightening their standards for new
account holders and to combat the still rising tide of negative
accounts, managers are looking for ways to identify their
present account holders ahead of time who might be headed for
trouble and thereby lessen their losses. Some major card issuers
are closing down inactive accounts and reducing lines of credit.
Gone too are the generous rewards programs as more and more
lenders cut corners to save money.
Some of these changes can instantly put a consumer in the
"over-limit" category prompting new and somewhat expensive fees.
These actions can also be detrimental to one's credit score
which can result in a borrower having to pay higher interest
rates on other current loans outstanding and any new loans that
may be originated.
Some major lenders don't mention Universal Default in their
initial credit offers, but often add it a few months later with
a "notice to cardholders" included with their monthly
statements. Tactics utilized under Universal Default include
scanning credit files for any late payments, looking for those
who are maxed out on any accounts, or payments made to any
creditor with a check not honored by the bank and, of course,
any liens or judgments against the property.
If the cardholder is a homeowner in a high risk market where
home prices have fallen 25 to 30 percent, like San Diego and Las
Vegas, their credit card accounts might be flagged for even
closer scrutiny, like two or three times a month, in order to
spot any trouble or delinquency earlier rather than later.
A cardholder who is close to being maxed out, even within a
thousand dollars of their credit limit, risks having a lender
lower their credit limit without notice, increase their minimum
payment, and increase their interest rate on the outstanding
balance by two or three percent.
The US Department of the Treasury has created the "Bad Credit
Hotel" an online game which teaches the basics of maintaining
good credit and explains things like credit scores, credit
history and debt management techniques. Visit
Consumers who are carrying larger balancesnearing 75 to 80
percent of their credit limits are advised to quit spending and
start paying down the balances. This may be a hard adjustment
for some who are already stretched to the limit because they
will need to start paying cash (again) for such basic needs as
gas and food.
Consumers are encouraged to read carefully the rate, fees and
other cost information included with any credit card offer and
especially a section titled: "Other APRs". Listed among them are
the cash advance rate, the default rate, the over limit rate,
the closed account rate and the overdraft advance rate.
First time credit users and sub-prime borrowers are cautioned
to read all initial credit offers very carefully. Such things as
annual membership fees, a one-time acceptance fee, optional
additional card fees and a one-time first credit limit increase
fee among others.
Default prevention is easy. Pay all monthly obligations, at
least a week or more ahead of the payment due date. Many lenders
and service suppliers, such as utilities, are placing reminder
notices in or on the cardholders' monthly statements. They
encourage consumers to have payments reach their offices, not on
the due date, but in time to have the payment processed and
posted to an account before the due date.
Fixing it is not so easy. Once a negative hits a credit
report, the damage is done. To get it removed, a consumer must
convince the creditor the problems lie elsewhere and that the
consumer is not at fault for a payment being recorded as late.
Usually cardholders lose this argument, unless they send their
payments certified mail and can actually track the date of
receipt. Absent any sort of proof your payments were delivered
on time to the creditor, borrowers will be paying higher
interest rates and other fees, perhaps for years to come.
If you are experiencing difficulty with your credit record or
with making all of your payments on time, there is help
available on spending, credit reports, credit scoring and credit
repair from the ICFE.
To improve spending techniques
visit the ICFE's web pages and take the interactive spending
quizzes - "Are you a good spender?" and "The Over Spenders
Quiz.". There are also guidelines on improving spending
including ways to save on household and grocery items.
About the ICFE:
The Institute of Consumer Financial Education (ICFE) was founded in 1982 by the late Loren Dunton (creator of the Certified Financial Planner (CFP) designation). The ICFE is dedicated to helping consumers of all ages to improve their spending, increase savings and use credit more wisely.
The ICFE is an award winning, nonprofit, consumer education organization that has helped millions of people through its education programs and Resources. It publishes the Do-It-Yourself Credit File correction Guide, which is updated annually. The ICFE has distributed over one million Credit/Debit Card Warning Labels and Credit/Debit Card Sleeves world wide.
The ICFE became an official partner with the Department of Defense/Financial Readiness Campaign in June of 2004.The ICFE was an active partner in the California Student Debt Resource Awareness Project (CASDRAP) which resulted in a new web site: (studentdebthelp.org). CASDRAP disbanded in 2010, shortly after the web site project was completed. In 2011 the ICFE assumed the single sponsorship of the (studentdebthelp.org) web site and is now responsible for its content and operation.
The ICFE is also an on-line help for consumers who spend too much. ICFE's spending help was featured in PARADE Magazine in the Intelligence Report section. The money helps and tips are from the ICFE's Money Instruction Book, our course in personal finance.
Visit the ICFE's other web sites at: www.financial-education-icfe.org and studentdebthelp.org. Both sites helps consumers and students with mending spending, learning about the proper use of credit, budget and expense guidelines, how to set up and implement a spending-plan and also how to access financial education courses and how to teach children about money. Other ICFE services include: Ask Mr. G, a free eNews, and an online resource center for students, parents and educators, plus financial education learning tools and a book store.