Image: Credit cards © Corbis

As we moved into 2013, U.S. consumers were carrying balances exceeding $800 billion on more than a billion credit card accounts. This is down from the peak of more than $950 billion during 2009-2010, but credit card debt is still the third largest component of household indebtedness, behind only mortgages and student loan debt. Americans’ love affair with plastic continues as many have come to rely on their credit cards to weather extended periods of unemployment in a stagnant economy.

When the latest batch of monthly statements starts showing up in your mailbox this month, you may find yourself wondering whether your debt load is starting to get out of control. I started helping consumers with their debt more than 15 years ago, and in that time, I’ve learned to recognize the warning signs of impending financial disaster. These are tried and true indicators that you’ve fallen into the credit card debt trap, a spring-loaded steel monster designed to snap shut and hold you firmly in its grasp. This is not just about the combined total balance you’ve been carrying from month to month. For one person, a debt load of $30,000 may be no problem, while for someone else it may represent total disaster. Rather, it’s about how much debt you’re carrying relative to your income, and whether the situation is sustainable over the long haul.

Let’s take a close look at the seven warning signs your debt is getting out of control. You don’t need to have all seven indicators to be at serious risk of a credit card meltdown. Even if only a few of these factors describe your situation, you should still take a hard look at your finances and consider the basic options for debt relief.

1. Credit limits maxed out or lowered

When Congress passed the Credit CARD Act in 2010, it eliminated the universal default feature where a bank could increase your interest rate even while you were paying them on-time, simply based on a default with an unrelated creditor. This was a big relief for consumers, and it stopped the banks from pushing people off the financial cliff when they were already hanging on for dear life. However, creditors still have an alternate method of accomplishing the same push. They can lower your available credit, even when you have paid them on time per your agreement.

The hidden problem with carrying credit card debt balances is that as the balances climb, you will eventually exceed the optimum credit utilization ratio, and this in turn will lower your overall credit score. Once that happens, your creditors may react by trimming open available credit. This further increases your credit utilization ratio, thus lowering your score even further, and creating a vicious downward spiral.

Once you reach the point where you have no available credit and have maxed out the cards, you’re trapped. Instead of being able to use your credit to manage monthly cashflow and hold the line, you suddenly find that you’re carrying a giant set of balances and you have nowhere else to turn for additional credit.

2. Interest rates bumping 20% even without default

The mathematics of credit card debt is relentless. At a time when interest rates are at a historic low, credit card institutions continue to charge interest rates that are very high by comparison. While many cards carry annual percentage rates (APRs) around 12%, it’s common to see non-default APRs up to 20% for purchases and 25% for cash advances.

Banks are required now to provide 60 days’ notice of any interest rate increase, but if you receive such a notice when you are maxed out, what can you do about it? Not much, except to keep making payments at the higher APR.

If you revolve balances totaling $30,000 at an APR of 20%, with monthly payments at $750, it will take 67 months to fully pay off the debt. Given the financial challenges that led to $30,000 of debt in the first place, how likely is it you will be able to pay $750 month after month without fail, for more than five years? One little bump in the road, and you’re on the slippery slope.

What most people end up doing is paying only the required minimums, in order to free up as much extra cash in their monthly budget as possible. Using the $30,000 scenario again, if you were to just keep paying only the minimum as the balance declined, it would take you an astonishing 44.5 years to pay off the debt.

3. Default is always just around the corner

Another clear warning sign that your credit card debt is about to go nuclear is that you are constantly skating on the edge of defaulted payments. It’s a struggle every month to cover the required minimums, but you are managing to just hold the line and so far have not missed any payments. All it takes in this situation is an upward tick in interest rates (still legal with 60 days’ notice) to push you over the edge.

Many of the banks now structure the minimum payment formula so that you are required to pay 1% of the balance each month, plus that month’s interest charges. So, for example, if you have a card with a $10,000 balance at 12% interest, using this formula your monthly payment would be $200, with $100 going toward principle and the remaining $100 toward interest. But if that rate jumps to 18%, watch what happens. The new minimum payment is $250 per month, with $100 toward principle and $150 to interest. This is a 25% increase in the required monthly payment.

Multiply this across several accounts and you can easily see how your payments could quickly climb out of reach. All of this can happen without a single defaulted payment taking place, but the new increased minimums are sometimes enough to cause people to default. Then of course, the trap gets worse as the default rates of 29% or more kick in, not to mention $39 late fees.

4. Default rates have already been triggered

Let’s say you have been faithfully making your minimum payments month after month. You are so stretched you have no emergency reserves, so when you’re suddenly faced with a major unplanned expense (car repairs, medical bills, etc.) you are forced to skip a couple of payments on your largest balance of $10,000. Goodbye 12% APR, and hello 29%! Then you start the “credit card shuffle,” where you skip other payments to catch up on the first ones you missed. Before long, all the accounts are affected, and you’re facing 29% interest rates across the board.

Let’s see what happens when APRs explode from “only” 20% to 29%. Instead of taking 67 months to pay off the $30,000 total, it will now require 143 months (almost 12 years). You will pay $76,838 in interest over that period, instead of “only” $19,851 of interest, a difference of more than six years longer and $56,987 of additional interest. That was a very expensive car repair.

Once the default interest rates have been triggered, you’ve fallen off your own private version of “the fiscal cliff.”