What to Do When You've Maxed Out Your Credit Cards

Published April 2021

Maxing out your credit card hurts your credit score. To your creditors, the fact that you use $2,000 of your available $2,000 credit means that you have stretched your finances to the limit and may soon become unworthy of credit.


Key Points

  • Maxing out your credit cards is bad for your credit score.
  • Create a payment plan to pay off your balance as quickly as possible.
  • Reconsider/redraw your budget.
  • Explore all your options to get rid of credit card debt.

Hitting your credit limit may happen for a variety of reasons. You may engage in impulse shopping, or you may find yourself cash-strapped due to circumstances beyond your control and have to resort to consumer credit to put food on the table. 

Regardless of how you have ended up with a maxed-out credit card, now that you are here, what should you do about it? 

When you hit your credit limit, you must recognize the problem quickly and swing into action. 

Stop Using That Credit Card 

There is an old adage that applies here: “When you are in a hole, stop digging.” Your goal is to pay down your credit card balance and avoid racking up interest. To do that, you have to stop spending

Remove that credit card from your payment options. Use the lock feature of your card if it has one. Freeze it into a block of ice. Do whatever it takes to eliminate it as a payment option for the foreseeable future. 

Create a Payment Plan 

Make it your top financial goal to pay off that card as soon as possible. If the circumstances do not allow you to stop using it, make a two-part plan that includes eliminating it as your go-to payment option and paying off your credit card debt. 

Do not limit yourself to making minimum payments. If you do that, it will take you about 45 years to pay off a $5,000 balance with a 20 percent APR! 

Try to pay off as much of the balance as possible, preferably before the end of the billing cycle. If you go over 30 percent with your credit utilization ratio, at the end of the billing cycle, your credit score will take a hit. 

Re-evaluate Your Budget 

If you max out a credit card, your budget is probably inadequate. You spend more than you can afford, and you probably do not know where all your money is going. 

Budgeting goes hand-in-hand with your payment plan, and it is the necessary prerequisite of any financial goal, modest or ambitious. Here’s a free budgeting template you can use to get started.

Determine how much you can put toward paying off your balance every month. Take advantage of opportunities to make extra payments. If you happen upon an unexpected windfall, use it to bring down your balance. 

Address Your Credit Card Debt 

Depending on your financial situation, you have various credit card relief options at your disposal. Contact a ClearOne Certified Debt Specialist at 866-481-1597 to learn exactly what your options are. Here are some options to consider: 

Balance transfer credit card. If your credit score is healthy, you can transfer your balance to a new credit card with an introductory interest rate of 0 percent.  Make sure that the transfer does not incur a balance transfer fee, and the APR is decent following the introductory period.

Debt consolidation loan. With such a loan, you can repay your credit card balance and secure lower interest on payments. Do not commit the mistake of running up your credit card balance again following the debt relief. You will only sink deeper into the debt trap that way. 

If your credit score has already taken a hit, balance transfer and debt consolidation may no longer be viable options for you. In that case, you need another option. 

Credit counseling. Credit counseling, sometimes referred to as debt management, may also be an option, as it works with credit card debt only. With debt management, you pay back the complete amount that you owe but at a reduced interest rate. However if you quit the program, all of your debts go back to the original terms. 

Debt settlement. Debt settlement can help you pay off your credit card debt even when your accounts are in delinquency. Through debt settlement, your creditors forgive some of your debt, making it easier for you to repay the rest.  

According to the American Fair Credit Council, over 98 percent of debtors enrolled in debt settlement plans save more money than they pay in fees for the service and over 50 percent of clients who stick with their debt settlement plan for at least six months complete the program and eliminate their debt entirely.. 

Do you want to know exactly how much money debt settlement can save you? Get a free savings estimate today.

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Topics: Credit Card Debt