When you miss a payment or two, your credit card company will react by charging you penalty fees. Miss a few more and they will change your interest rate to the penalty interest rate. If you still do not make a payment, they get serious with you.

To a creditor, "debt" refers to the total amount you owe them, not just the charges you made. It includes all fees and penalties, which become a part of your debt. That means they can charge you interest on your penalties and fees. So that minimum payment you could not make just keeps getting higher, as does your debt load (the total amount you are in debt).

To compel you to pay and to warn others about your current payment habits, they damage your credit report (which is a statement of your credit history) by reporting your payment history. This impacts your Fair and Isaac (FICO) score, which hits you hard: After all, your credit rating is used to determine decisions about where and how you will live, what kind of job you can apply for, what type of car you can drive and how much the insurance for that car will cost. Businesses and others start looking at your credit utilization rate, comparing your credit limit to what you have borrowed. They usually decide they do not want to do business with you or they will do so only if you will pay more than an average customer.

Debt collectors begin to call and they are not interested in your sad story. These are people and agencies who make money by encouraging debtors to pay up. The way they see it, you are the one who signed up for the card, agreed to the contract and spent all of that money. They are not inclined to be compassionate.

If you have more than one credit card, this is where they pile on. If you default (withhold payments) on one card, all of the credit cards you own can declare you in default, even if you are making payments to them on time. This maneuver is called universal default and it is usually one of the legs on the road to bankruptcy, a legal procedure caused by a borrower’s inability to pay debts. The bankruptcy court may order a forced sale of property to pay off your debts; this is called a liquidation. Good bye, stuff. Hello, lawyers.