WHAT THE CREDIT CARD COMPANIES DO:  Say you own five credit cards, all with balances of $2,500 each at 11% interest.  You are current on each one.

Later, on ONE of the cards you are late.  Only one.  This is when the dreaded “Universal Default” is applied.  Buried deep in the micro-font contract that you signed when you applied for the credit card, is language that if you are late on ANY of your credit cards, then ALL of your credit cards interest rates will be increased.  Not just the ONE that you were late on, but ALL of them.

Thus all of your credit card interest rates are elevated to near 30% even though you were late on only one.

WHY DO THE CREDIT CARD COMPANIES DO THIS?  Simple greed.  It is now estimated that banks and credit card companies earn MORE from these conspiratorial increases in credit card interest rates than they do on loans.

Why do we say conspiracy?  This is, in our view, the illegal act of civil conspiracy when all of your credit card rates increase when only one was late.

WHAT CAN YOU DO?  First be wary.  Absolutely avoid Money Management Internationals (“MMI”) efforts to “help” you.  Why?  Because MMI is partly financed by credit card companies.  We do not know what percentage of MMI is owned by the credit card companies, but any ownership by them is a clear conflict of interest. 

Your last resort is the US Congress.  Senator Dodd (Chair of the Senate Banking Committee) from Connecticut is conducting hearings on this issue.  Additionally, Senators Carl Levin (D) of Michigan and Clair McCaskill (D) Missouri introduced legislation in May 2007 to “put an end to unfair and abusive credit practices that outrage so many American families.”

The problem with the US Congress, whether Republicans or Democrats, is that it has become “the best government money can buy.”  The generosity of the banking and finance industries in making political campaign contributions is enormous.

RAYS OF HOPE?  Go to CreditRatings.com, an advocacy group that helps consumers, like you and me, to understand the whole process.  Secondly, huge kudos to Citigroup, Inc. for voluntarily ending the universal default.  Possibly this will inspire other credit card companies to do the same.