What Happens to Your Credit When You Max Out Your Credit Cards?

Published July 2021
Woman holding a credit a card

Maxing out your credit cards can affect your credit score, hike your payments, and land you in a debt trap. Find out how you can pay down a maxed-out card.

Key Points:

  • Maxing out your credit cards can hurt your credit score.
  • It can also increase your minimum payments and render your credit cards useless.
  • You should explore options such as debt settlement if you have already maxed out your cards.

Most credit card owners understand that their card has a credit limit for a reason, and very few people get a credit card with the intention of maxing it out.

Maxing out your credit card” means that you borrow enough money through it to hit, or even exceed, your credit limit. Once you do that, your credit card issuer won’t accept additional charges to the card until you make a payment.

That may be inconvenient, but that’s just the tip of the iceberg. Maxing out a credit card initiates a chain of events that can open up a world of financial hurt for you.

Maxing Out Deals a Knockout Blow to Your Credit Score

Your credit score is based partially on a component called credit utilization ratio. In fact, your credit utilization ratio makes up 30% of your FICO score. Anything you do that impacts your credit utilization also impacts your credit score.

A healthy ratio for credit utilization is in the 30% range. Exceeding this threshold may trigger a drop in your credit score. The impact that altering your credit utilization has on your credit score depends on several factors.

  • If you have 5-6 cards and max out one with a low credit limit, the impact on your credit score will likely be insignificant.
  • If you have a single credit card, you will take your credit utilization to 100% by maxing it out.
  • Your credit score before the max-out incident also determines the size of the score drop you will experience. Higher credit scores suffer more than lower ones.
  • If you carry around the balance longer, you will hurt your credit score more. Interest that collects above your credit limit is a big red flag for lenders.

High credit utilization indicates to lenders that you are a high-risk borrower, unable to control your spending.

Maxing Out Robs You of Financial Options

Although your card issuer may allow you to use some extra credit above your limit, you won’t be able to rely on your credit card to cover unexpected expenses. By digging yourself deeper into debt, you turn what was once an asset into a liability.

Additionally, because maxing out your credit card impacts your credit score, it can also impact your ability to get new credit, whether that is in the form of another credit card or a loan for a car or home. In some instances, it may even impact your ability to rent an apartment.

Maxing Out May Increase Your Minimum Payment and Interest Rate

A maxed-out credit card may mean that your lender will increase your interest rate and minimum payments, making it even more difficult for you to climb out of the debt hole.

Seek help from a professional debt specialist.

Get Credit Card Relief for Maxed Out Credit

If you have maxed out your credit cards, it may be time to look at how to regain control of your finances and improve your credit situation. ClearOne Advantage can help. Our Certified Debt Specialists are standing by at 866-481-1597 to help you explore your debt relief options and design a debt relief plan that fits your budget and your life. Get a free savings estimate today.

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Topics: Financial Education