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Max-Out Credit Card: What This Means And What To Do About It

Matt Cardwell6-minute read
UPDATED: December 20, 2023

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A maxed-out credit card happens when your outstanding balance matches your credit limit. This means you can no longer make purchases with this card until you reduce the balance, but other repercussions are important to be aware of as well.

Let’s walk through what happens when you have a maxed-out credit card, ways to pay down a maxed-out credit card and how to avoid maxing out your credit card in the first place.

What Happens If You Max Out A Credit Card?

Maxing out a credit card can affect your finances in multiple ways if you aren’t able to pay down your credit card balance quickly. Hitting your credit limit can bring down your credit score, increase your minimum payment, cause transactions to be declined and more.

Next, we’ll take a closer look at what can happen when you max out your credit card, and why.

Your Credit Score May Go Down

Your credit score is your primary key to qualifying for loans and lines of credit, and a maxed-out credit card could cause your score to drop because of a change in your credit utilization ratio.

Your credit utilization, which is the percentage of your available credit that you’re using, impacts your credit score. It’s best to keep your credit utilization ratio under 30%, as a higher ratio can negatively impact your credit score. When your credit card is maxed out, your credit utilization ratio is 100%. Your credit card issuer reports your usage to the credit bureaus, which then factor that activity into your FICO® Score.

Transactions Can Be Declined

Once you’ve maxed out your credit card, you can no longer use that card to make purchases. If you try to use the card to make a purchase, the card will be denied and leave you unable to pay for a purchase or service unless you have another means of doing so.

This can also inconvenience those who have automated monthly bill payments attached to the maxed-out credit card, since the bills may not get paid on time, possibly causing you additional financial complications.

Minimum Payments Can Increase

Some credit card issuers set your minimum payment as a percentage of your outstanding balance – the higher your balance, the higher your minimum monthly payment. Maxing out your credit card means you’ll have to pay the highest possible minimum amount for your next credit card bill.

If you live on a tight monthly budget, this higher minimum payment could mean not being able to pay some of your bills.

You May Be Charged A Higher Interest Rate

When your credit score drops and your credit utilization rises, your credit card issuer may sense some financial troubles on your end and raise your annual percentage rate (APR). This can depend on your credit card issuer and how long you’ve had the card, and it will only affect future purchases with that card.

The average interest rate for credit cards is currently around 28%, which is already high. If you don’t think you could afford a higher APR on your credit card, take steps to pay down your credit card debt before maxing out your limit.

How To Pay Down A Maxed-Out Credit Card

If you’ve maxed out your credit card or are close to it, figuring out how to pay down your credit card debt is the best way back to safety. You can do this successfully in a few ways, which we’ll explore below.

Consolidate Your Debt With A Personal Loan

A personal loan can work for almost any type of purchase or expense, which can include paying down large amounts of debt. Most lenders can offer $1,000 – $50,000 to qualified borrowers, and if that’s enough to pay off your outstanding balance, you could use a personal loan to consolidate your debt.

With a debt consolidation loan, you use the funds from the loan to pay off all of your credit card debt. You’ll then owe monthly payments on this new loan, but borrowers may be able to earn a lower interest rate than before, especially if their APR went up on the maxed-out card.

If you’ve maxed out multiple credit cards that you owe payments on, you could use a debt consolidation loan to pay them all off and give yourself just one monthly payment and interest rate to worry about.

Try A New Debt Repayment Method

You’ll have a hard time paying down your maxed-out credit card balance by just making the minimum payment each month. If your budget allows for it, try paying above the minimum or making extra payments to bring your balance down faster.

If you have multiple credit cards with high or maxed-out balances, consider adopting a tried-and-true debt repayment strategy such as the debt avalanche method. This method espouses paying down your high-APR cards first to possibly save on interest in the long run.

Alternatively, there’s the debt snowball method where you focus on paying down the lowest balances first and building your way up to the highest balance (i.e., the maxed-out credit card). This approach tends to give cardholders early wins because it allows them to pay off entire cards fairly quickly. However, if your highest balance has a high interest rate, you could lose more money on interest charges along the way.

Use A Balance Transfer Credit Card

A balance transfer is another method for debt consolidation that involves moving your outstanding balance onto a new credit card. Some credit card issuers may offer a 0% APR period when you sign up for this new card, giving you 6 – 21 months of zero-interest payments while you repay your balance. After that introductory period, though, you’ll owe interest on the remaining card balance.

Tips For Avoiding A Maxed-Out Credit Card

If you want to totally avoid the consequences of a maxed-out credit card, do your best to not hit your credit limit. You can help yourself do this by:

  • Asking for a higher credit card limit: If you have a low credit limit but need to use your card frequently, it can be easy to get close to maxing out that card. You could request a higher credit limit if you’re in good standing with your credit card issuer, but make sure you don’t max out this new limit.
  • Tracking your credit card balance: Keep tabs on your current credit card balance by looking at your credit card statement or checking on the card issuer’s app, if available. This way, you’ll be able to see if you’re getting too close to your limit.
  • Sticking to a monthly budget: Making and sticking to a budget can help you stay within certain spending parameters month-to-month. Knowing how much you’re spending every month, barring any emergency expenses, can prevent any unwelcome surprises when you see your next credit card bill.
  • Building an emergency fund: If you use your credit card for unexpected or emergency expenses, you might be better off building an emergency fund to handle those costs. Having an emergency savings account along with a monthly budget can help keep your credit card spending to a minimum.
  • Using cash more often: Paying in cash or using a debit card can keep you from borrowing money you don’t have, instead limiting you to what you actually have on you. If you’re not borrowing from your credit limit, you’re not adding to your credit card balance.

Why It’s Bad To Max Out A Credit Card

As discussed, a maxed-out credit card can lower your credit score, cause transactions to be denied, raise your minimum payments and increase your interest rate. You may face all of these consequences if you don’t pay down your outstanding balance quickly.

If your credit score drops, you could have trouble qualifying for other kinds of loans (personal loans, auto loans, home loans, etc.) now or in the future. You could also find yourself trapped in a cycle of credit card debt if your minimum payment and/or interest rate gets too high.

Final Thoughts

A maxed-out credit card can lead to serious financial consequences, so it’s best to keep an eye on your spending to prevent it happening. If it does happen, take steps to pay off your debt as soon as possible.

Think a debt consolidation loan can take care of your high credit card balance? Start the personal loan process today with Rocket Loans℠. 

Getting a personal loan has never been easier.

The Rocket LoansSM application process makes borrowing simple.

Matt Cardwell

Matt Cardwell is Editor-in-Chief and leads the Rocket Publishing House at Rocket Mortgage. During his nearly 15 years with Rocket Mortgage, Matt has occupied a diverse array of Marketing leadership roles, including leading and growing the company’s early digital and internet marketing efforts; Vice President of Marketing; Director of Social Media and Director of Business Channel Strategy.