What is a universal default clause?
A universal default clause is something found in credit card contracts in Texas. It is a clause that allows the credit card company to increase the interest rate on a cardholder’s account if they don’t pay another creditor or fail to meet any of the provisions of their credit card contract. In other words, if you don’t make payments on time or if you exceed your credit limit, the credit card company can raise your interest rate, usually to the maximum rate allowed for that credit card. This means that even if you are paying all of your bills on time and in full, the credit card company can still increase your interest rate if they think you are a risk. It is important to note that in Texas, the Texas Finance Code does not allow a credit card company to impose a universal default clause. This means that credit card companies will not be able to increase your interest rate if you fail to meet the terms of another creditor. This is a very important protection for Texas consumers and it ensures that they can use their credit cards without worrying that their interest rate will increase without warning.
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