High-rate debt has become an increasingly common part of many people's financial lives over the last decade and the economic issues that have been looming recently, like sticky (but now cooling) inflation and elevated interest rates, have only made it worse. As a result, the total amount of credit card debt nationwide is now sitting at a record high of $1.21 trillion, and the average cardholder now owes nearly $8,000 on their credit cards. Unsurprisingly, the surge in credit card debt has also driven up the number of delinquent credit card accounts and accounts landing in collections.

But if you have an unpaid card account that's been turned over to collections, it's important to understand that your balance doesn't just stop growing at that point. Collection debt generally operates under its own set of rules and the fees, interest charges and other costs that are allowed to accrue under these rules can cause your balance to balloon out of control quickly. What that means is the unmanageable credit card balance that landed you in collections in the first place can, and often will, become even more difficult to tackle over time.

How much does collection debt really cost you in the long run, though, and what can you do to lower that burden before it spins further out of control?

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What is the true cost of collection debt?

The price of debt in collections is more than just the number on your past-due bill. There are hidden (and not-so-hidden) factors that can dramatically increase the overall cost, including:

The original balance plus interest and late fees

When a credit card debt goes into collections, you still owe the original balance — but on top of that, most creditors will add even more fees and ongoing interest charges to the mix. That means your collection debt keeps growing every month it goes unpaid, which can quickly double or even triple the amount you originally owed.

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Collection agency fees

When your creditor sells or transfers the debt to a collection agency, that agency often tacks on its own set of fees. Depending on your state laws and the original contract terms, debt collectors will typically charge either a percentage of the balance they recover or a flat-rate fee. For example, if you owe $2,000 on a credit card debt that's gone to collections, the collection agency might tack on an additional $500 to $1,000 in collection costs. These extra charges, combined with the original balance and interest, can make a manageable debt suddenly feel impossible to pay off.

Legal costs and court judgments

If the collection agency sues you and wins, you may also be responsible for court costs, attorney's fees and any interest charges that accrue over time on the judgment. A formal court judgment can also open the door to wage garnishment or bank account levies, where a percentage of your paycheck or account balance is seized to repay the debt. 

Credit score damage and long-term impacts

While not a direct dollar amount, the damage to your credit score from collection debt can indirectly cost you hundreds or thousands of dollars in extra interest costs over time. After all, collections accounts can stay on your credit report for up to seven years, lowering your score and making it harder (or more expensive) to qualify for future loans, credit cards, rental housing or even certain jobs. So, even if you never pay another dime on that old collection account, the long-term fallout can be enormous.

How to lower the cost of your collection debt

If you're worried about the high cost of your collection debt, here's what you can do to try and shrink it:

• Negotiate a settlement directly: Many debt collection agencies are willing to accept less than the full balance if you offer a lump-sum payment in return.
• Ask for fee and interest waivers: Some debt collection agencies may waive certain late fees or stop adding interest if you show you're making a good-faith effort to pay. It never hurts to ask.
• Seek professional help: A debt relief company can often negotiate a settlement on your behalf, potentially securing better settlement terms or lower fees than you'd get on your own. 
• Consider your legal options: You may have defenses, such as expired statutes of limitations, or the debt collector may have violated debt collection laws, giving you leverage to negotiate or even dismiss the case.

The bottom line

The total cost of collection debt goes far beyond what's printed on your original bill. Once you factor in ballooning interest, late fees, collection charges, legal costs and credit score damage, the financial burden can quickly spiral out of control. But with proactive steps, like negotiating a settlement, asking for fee waivers or getting professional help, you can often reduce the amount you ultimately pay. The longer you wait, though, the more the costs stack up. So if you have debt in collections, now is the time to take control and start rebuilding your financial health.