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Oops- I Maxed Out My Credit Cards, Now What?

When you don’t make enough money to support your lifestyle, you may make up the difference by using your credit cards. But, you can only do this for so long before all your available credit runs out. It doesn’t take long to max out all your credit cards, even those with high limits.

No one takes out a credit card with the intent of maxing it out. We all have the best of intentions when that card first comes in the mail.

But one bill not paid in full at the end of the month can turn into another, and another, and another. The next thing you know, you’ve hit your limit.

What Happens if You Max Out Your Credit Card

The answer seems simple, right? Maxing out your credit card just means you hit the credit limit and can’t use the card until you pay the balance down.

If only it were that simple.

Maxing out your credit card has far more implications than it may seem at first. Here’s just a few of the things that can happen when you hit your credit limit:

  • Your credit score will take a hit
  • Your credit card becomes unusable until you pay the balance down
  • Your minimum payments might become unmanageable
  • The increased balance combined with the credit card interest may make paying your credit card off (or even down) much harder to do

Allowing the balance on your credit card to increase to the point at which it’s maxing out is similar to a snowball turning into an avalanche.

At first, the snowball seems small enough to catch. But as it picks up speed, it grows in size, gains momentum, and becomes harder and harder to keep up with.

The speed, size, and momentum turn that tiny snowball into an unwieldy and dangerous avalanche.

Stop Using All Credit Cards

Even if you have low balances on other credit cards, don’t use them again until you’re out of debt. If you’re using your credit cards to survive month to month, then consider talking to a credit counselor or a person who is very good at budgeting.

Oddly, you might have the urge to get a new credit card during the early stages of paying off the balance. Resist the impulse to get a new credit card with a shiny new credit limit. The hard inquiry on your credit will take points off your credit score, but more importantly, you might overspend with a new card.

Make Your Payments Every Month

Maxing out your credit cards can trigger higher minimum payments, and there’s the risk of default if you can’t afford the higher amount. Additionally, missing or sending late payments can damage your credit score and create problems with your creditors. The bank can charge late fees, raise your interest rate, or take legal action to collect what’s owed. Make at least the minimum payment by the due date, and if you’re going to be late, ask your creditor for an extension

Find Extra Money in Your Budget

Getting out of credit card debt is one of the toughest financial challenges many people face. Some people accumulate credit card debt because they didn’t have enough income and they lived off plastic. Since paying off debt requires some amount of disposable income, you might need to put on your thinking cap and brainstorm ways to earn extra money.

Where can you cut back? Cancel your gym membership, get rid of cable, only shop when necessary, don’t eat out as much, look for a part-time job, or talk to your employer about overtime.

Use Cash 

While using cash means forfeiting potential rewards earnings and essentially subsidizing the purchases of card users, it can be helpful in the face of a low credit limit or if you’ve run into trouble with overspending in the past. Reevaluating whether certain automatic monthly payments need to be made with plastic will also be beneficial.

Getting yourself used to a cash only spend makes you never want to reach for your credit cards. Force yourself to hide those cards and not take them with you on a day out. This will make you more disciplined to only spending the cash you have.