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What Happens When You Have a Maxed-Out Credit Card?

Maxing out your credit card can hurt your credit score and your budget, but there are ways to repair the damage.

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By Erin Gobler

Written by

Erin Gobler

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Erin Gobler is a freelance personal finance writer with more than eight years of experience writing online. She’s passionate about making the financial services industry more accessible by breaking down complicated financial topics in simple terms.

Edited by Kelly Larsen

Written by

Kelly Larsen

Editor

Kelly Larsen has written and edited content that spans many personal finance topics, including buying a home, saving for retirement, and paying off student loans. She first started learning about the world of finance through her work at Finance101.com. In 2020, Kelly helped launch Paven, a financial well-being app.

Updated June 14, 2024

Editorial disclosure: Our goal is to give you the tools and confidence you need to improve your finances.

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Credible Takeaways

  • Maxing out your credit card can lead to your minimum payment going up, transactions being declined, and a negative affect on your credit score.
  • If you spend up to your credit limit each month and pay it off each month, you could still have a high credit utilization ratio.
  • Consider getting a balance transfer card or a debt consolidation loan to make paying off credit card debt more manageable. 

When you sign up for a credit card, the card issuer will approve you for a certain credit limit, which is the amount you’re able to spend on the card. If you spend up to the limit, you’ll max out your credit card.

The good news is that maxing out a credit card is fairly common, especially with a low credit limit on a card that’s used frequently. However, there could be some negative consequences if you aren’t prepared to pay off the balance.

1. Your credit score might drop

First of all, maxing out your credit card can have a major impact on your credit score because it increases your credit utilization.

Your credit utilization is the percentage of your revolving credit limit you’re currently using. So if you have a credit card with a $1,000 limit and you have a balance of $500, then you have a credit utilization ratio of 50%.

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Your credit utilization comprises all of your credit cards. So if you have two credit cards, each with a $500 limit, one with a balance of $400, and one with a balance of $100, you would still have a credit utilization of 50%.

Your credit utilization ratio is one of the most important factors that goes into calculating your credit score. It, along with the amount of debt on your other accounts, makes up 30% of your FICO credit score. The only factor more important is your payment history, which makes up 35%.

The good news is that if you pay off your card, your score should bounce back fairly quickly — likely the next time your credit card issuer reports your balance to the credit bureaus.

2. Transactions could be declined

Another thing that is likely to happen when your credit card is maxed out is that future transactions are likely to be declined.

Some credit cards may allow you to go over your credit limit if you’ve opted in to allow this. But in return, you could be charged a fee of up to $25 the first time you go over your limit and $35 for the second time if it’s within six months. In other cases, a card issuer may allow you to go over your credit limit without a fee, but usually only by a certain amount.

It may not seem like that big of a deal to have a transaction declined, but it depends on the transaction. For example, if one of your monthly bills is set to autopay from your credit card and that payment can’t go through, you could end up paying a late fee on that bill.

3. Your minimum payment could go up

Maxing out your credit card is likely to cause your minimum monthly payment to increase. While each credit card issuer has its own method for calculating minimum payments, they’re typically based on a percentage of your balance.

Some credit card companies might charge you a flat percentage of your balance, while others may charge a percentage of your balance, as well as any new interest and fees. You can find out how your card issuer calculates your payment by reading your card’s terms and conditions.

If you pay your credit card off in full each month, you probably aren’t that concerned about your monthly payment. But if you’re on a limited budget and can only afford your minimum payment each month, then maxing out your credit card could make it difficult to meet your monthly obligations.

4. Interest charges could be excessive

It may not seem like maxing out your credit card is a big deal, especially if you plan to pay it off each month. But it can also be a slippery slope that can lead to excessive interest charges and increasing credit card debt.

Let’s say you pay all or most of your credit card balance each month. But one month a financial emergency pops up that requires you to go over budget. Suddenly you aren’t able to pay your credit card off and credit card interest compounds daily. This means that every day past the grace period, accrued interest is added to your balance, which may then start to accrue interest. As a result, the balance can add up quickly. The more interest you accrue and the higher your balance gets, the more difficult it will be to pay it off.

Credit cards have notoriously high interest rates: As of February 2024, the average rate on a credit card was 21.59%, according to the Federal Reserve.

What should you do when you max out a credit card?

If you’ve maxed out your credit card, don’t panic. There are a few steps you can take to start relieving your debt burden right away.

Stop using your credit card immediately

First and foremost, stop using your maxed-out credit card. As we discussed, transactions that exceed your credit limit are likely to be declined. And if they aren’t declined, they could result in fees that will only cost you more money.

Get a debt consolidation loan

A debt consolidation loan is often a personal loan you use to pay off your credit card debt. But it could also be a home equity loan if you have enough home equity to qualify and are ok using your home as collateral.

You can pay off one or multiple credit cards with a debt consolidation loan, meaning you’re reducing the number of payments you have to make each month. And because personal loans often have lower interest rates than credit cards, you’re saving yourself money in the process. Finally, personal loans often have payment terms of up to seven years, meaning you can take a bit more time to pay off your debt than if you used a balance transfer card.

Adjust your budget

Maybe you’ve already budgeted for all of your spending and won’t have a problem paying off your maxed-out credit card. But if that’s not the case, it’s time to adjust your budget.

Look at how much money you have left in your budget to pay your credit card bill. If it’s not enough to cover the minimum payment — and preferably the entire balance — then see where else you can cut back.

Pay off your card as soon as possible

As we mentioned, credit cards have high interest that compounds daily. You won’t pay interest on purchases you pay off within the same billing cycle, but any that aren’t paid off will accrue interest retroactively from the day they were posted to your account.

Because of how expensive credit card debt can be, the best course of action is to pay your balance off in full right away. If you can’t pay it all in one month, put yourself on a payment plan that allows you to pay it off in as few months as possible. It’s also a good idea to contact your credit card company and ask about your options.

Consider a balance transfer credit card

A balance transfer credit card can be an excellent way to tackle your credit card debt without any of your money going toward interest. With this option, you transfer your credit card balances to one new card. Many of these cards have an introductory 0% annual percentage rate (APR) for up to 21 months or more.

If you pay your full balance off in that period, you won’t pay any interest. More of your money will go toward your principal balance, and you’ll pay your debt off faster.

Check Out: Best Low-Interest Personal Loans

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Tip

It may also be wise to stop using your other credit cards until you can get your debt and spending under control.

How to prevent maxing out a card in the future

If you’ve maxed out your credit card, it’s important to find a way to pay it off quickly. But it’s just as important to avoid maxing out your card in the future. Here are a few ways to help you stay below your credit card limit moving forward:

  • Stick to a budget. One of the best ways to avoid maxing out your credit card is to create a budget — and stick to it. If you stick to your self-imposed spending limits each month, there won’t be any surprises on your credit card.
  • Check your balance often. In the past, you may not have noticed how high your credit card balance was until you went to pay it off. To avoid that in the future, check your balance often so you’ll know right away if it’s getting high.
  • Make more frequent payments. You can avoid getting close to your credit limit by paying off your card weekly or every other week. This strategy is especially effective if you use your credit card for all your spending but pay it off in full each month.
  • Have an emergency fund. A credit card can be an effective backup plan for a financial emergency, but it can also be an expensive one. Consider building an emergency fund to use for big expenses instead of your credit card.
  • Use a different payment method. If you struggle to limit your spending on your credit card, stop using it and use either cash or your debit card instead. That way, you’ll be limited to spending the money you actually have, instead of going into debt.
  • Request a higher credit limit. A higher credit limit isn’t the right choice for everyone, especially those who struggle to rein in their spending. But if you have a low credit limit, use your credit card for spending to take advantage of the rewards, and pay it off in full each month, then a higher credit limit could be useful.

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Meet the expert:
Erin Gobler

Erin Gobler is a freelance personal finance writer with more than eight years of experience writing online. She’s passionate about making the financial services industry more accessible by breaking down complicated financial topics in simple terms.