Credit cards can trigger credit tailspin

WASHINGTON, Dec. 16 (UPI) -- U.S. credit card customers are finding the cards often come with a backlash that can trigger a cycle of reduced credit limits and higher interest charges.

Late payments are met with a hefty fee, but also cause lenders to lower limits. Customers carrying a balance on their cards can then find the ratio of money borrowed to money available to them has shifted enough to lower their credit scores, USA Today reported Tuesday.

The U.S. Federal Reserve has said it will announce new credit card rules soon, but many feel the rules will not be enough and new legislation needs to be passed, the newspaper said.

CardTrak.com reported the typical household now owes $11,211 on credit cards. A typical household now has 11 credit cards, CardTrak.com said.

A small mistake can also cause interest rates to soar. "If people get charged 30 percent interest, that is going to push them over the edge," says Sen. Carl Levin, D-Mich., who has co-sponsored a bill to crack down on lenders.

"You raise their monthly payments ... this is going to drive people straight into bankruptcy," said Robert Manning, author of "Credit Card Nation: The Consequences of America's Addiction to Credit."