What term describes the practice of increasing the interest rate due to a late payment made to any creditor?

The correct term for the practice of increasing the interest rate due to a late payment made to any creditor is referred to as the universal default clause. This clause allows creditors to raise the interest rate on a borrower's account if the borrower makes a late payment to any creditor, not just the one who issued the credit. This means that if a borrower defaults or is late on payments with one credit line, it can trigger a higher interest rate on other lines of credit, regardless of their payment history with those accounts.

The universal default clause is particularly significant in credit agreements and can lead to substantially increased costs for consumers who may inadvertently trigger these penalties through late payments with other lenders. Understanding this term helps consumers recognize the broader implications of their payment behavior across multiple debts, reinforcing the importance of maintaining timely payments on all accounts to avoid increased financial burdens.