If your are not familar with the term universal default clause you should be. Universal default describes the avalanche of penalties, higher interest rates, and other serious repercussions that can be triggered by being late on even a single credit card or loan payment.

Buried deep in the fineprint legalese that accompanies all credit card offers are the specific penalties that result from late or inadequate payments. Typically, these include late fees and a “punitve APR” increase that can raise the interest rate on your account to 30% or higher. Late payments can also wipe away any accumulated rewards, such as frequent flier miles you may have earned on the account. Pretty bad stuff, right?

But even worse may be the consequences of a late payment that extend beyond the account itself. For example, most auto insurers now check credit and payment records. A single late credit card payment can raise auto insurance rates by as much as 50 percent. Similarly, with universal default, mortgage, car loan, or other loan payments can be adversely impacted.

Some consumer and public interest groups are pushing for laws to limit the adverse impacts of universal default. But for now the best strategy is to build a strong line of defenses to ensure you are never late on a monthly credit card payment. Here’s how:

- Know your credit card cycle. Credit issuers bill in regular cycles meaning that key dates like the “statement closing date” and the “payment due date” fall more or less at the same time each month. If you don’t know what these dates are for the card you use, you should call the credit card company and find out. Enter these dates onto your calendar. If you use a computereized calendar, use the “reminder” feature to specifically alert you at least 10 days in advance of the payment due date.

- Set up an automatic debit from your checking or HELOC account to cover at least the monthly minimum credit card payment. The automatic payment should be scheduled well in advance (2-3 weeks) of the payment due date.

- Hopefully, you are a savvy credit card user who pays their outstanding balance in full each month, avoiding all interest charges. If so, there may come a time when your personal cashflow and the credit card payment due date are not in sync. Perhaps the credit card payment is due on Monday, but the paycheck you apply to the payment arrives Friday. These are situations where a short-term HELOC loan can be extemely useful, allowing you to bridge the gap and avoid penalties and the high interest costs that result from not paying in full. Of course it is essential that you repy the HELOC bridge loan as soon as possible to minimize interest costs and so you don’t increase overall indebtedness.

- Finally, should you be unfortunate and get stung by a universal default provision, having an open HELOC will allow you to immediately pay off the credit card balance in question and work to resolve the matter with the issuer. In fact, issuers in some instances, are known to quickly reverse universal default charges when faced with the immediate loss of an otherwise stable card holder.

Universal default has created a true minefield for credit card users. Fortunately, there are tools and techniques that savvy persons can use to safely navigate their way through.