I've read plenty of times about how credit card companies routinely charge many borrowers as much as 30% interest or more per year. I even reported on it. In that article, I explained a practice known as "universal default," which can get you whacked with sky-high interest rates on many or most of your cards if you're late paying just one bill. And the default typically kicks in without your receiving any notification about it.

A 2005 survey by Consumer Action, a consumer advocacy group, found that 45% of card issuers used a universal default hike if a customer's credit score decreased. It also found that among those using universal default, 86% use it when customers pay their monthly bill late, 43% use it to punish users with too much debt, and 33% use it to punish those with too much credit. That's right -- you can get your rate raised if you have too much credit available!

On our Credit Cards and Consumer Debt discussion board, you'll find lots of people who've dug themselves out from serious debt and are now helping others do the same. Many people post their entire financial situations on the board, in an attempt to get specific suggestions. Community member Soccerdad9998, for example, recently detailed more than $100,000 in non-mortgage debt, along with nearly $200,000 in mortgage debt. (Read his whole post and the long discussion ensuing.) Check out the interest rates he's facing from some well-known card issuers.

Card Rate
MBNA (owned by Bank of America) 29.99%
JPMorgan Chase 29.99%
Citigroup 32.24%
Morgan Stanley's Discover 28.24%
Capital One Financial 17.00%
Wal-Mart's Sam's Club 23.15%
Target 28.00%
Kohl's 21.90%

On his MBNA card, he owed about $46,000. Apply the 30% interest rate to that, and MBNA was demanding nearly $14,000 in interest each year on this debt! On $100,000 of debt, if your average interest rate is 25%, you're facing $25,000 in interest charges alone each year -- and on top of that, you'll be wanting to pay down the principal significantly, too. It suddenly becomes easy to see how excruciating this kind of debt can be.

If you or anyone you know is trying to dig out from under debt, visit our Credit Center, which features some good info about the credit card industry and tips on getting out of debt.

Fortunately, some lawmakers have been looking at the practice of universal default, and they don't like what they see. We may see less of it in the future, if some recently proposed legislation doesn't languish and die. (Learn more, including how to connect with your congressional representatives.) In the meantime, pay your bills on time!

Longtime Fool contributor Selena Maranjian owns shares of Wal-Mart, which is an Inside Value recommendation. Bank of America is a Motley Fool Income Investor pick. The Motley Fool has a disclosure policy.