What to expect if you max out your credit card

It can happen to anybody. For one reason or another, you reach the credit limit on your credit card. In other words, it’s maxed out. And that might mean there’s no credit available for purchases until you reduce your balance.

Maxing out a credit card can negatively affect your credit score and overall finances. That’s the not-so-great news. But  if you make the right moves, you could lessen the impact of a maxed-out card.

Key takeaways

• A maxed-out credit card can lead to declined purchases, impact your credit scores and increase your monthly credit card payments. 
• You can deal with a maxed-out card by doing things like paying down the balance on your card and establishing a budget to help keep spending in check.
• It may be possible to pay off a maxed-out card more quickly by consolidating your debt or transferring the balance to a new card with a lower interest rate. 

At first, it may seem like maxing out a credit card is merely an inconvenience. But a maxed-out card could create issues for your credit. They may include declined transactions, decreased credit scores and increased monthly payments. 

Some credit card issuers decline transactions when cardholders reach their credit limit, which can be frustrating. But if your account has access, you can use Capital One’s Confirm Purchasing Power tool to check whether an overlimit purchase may be approved. You can also disable the ability to spend over your credit limit in your overlimit preferences.

While Capital One doesn’t charge fees for going over your credit limit, other credit card issuers may. A card issuer can charge an over-the-limit fee only if you’ve agreed to participate in its over-the-limit coverage program. If you’re not a Capital One customer, be sure to check with your card issuer to understand the terms of its over-the-limit coverage program before you opt in. View important rates and disclosures.

Maxing out your credit card can affect your credit utilization ratio. This ratio is a percentage of how much credit you’re using versus your total available credit. The Consumer Financial Protection Bureau says to keep your credit utilization ratio below 30%.

What does your credit utilization ratio have to do with your credit score? A lot, according to two popular credit-scoring companies.

At FICO®, the amount of available credit you’re using makes up 30% of your credit score. At VantageScore®, credit utilization ratio makes up 20% of your credit score.

Among other things, a low credit score could result in a credit or loan application being denied. It could also mean paying a higher interest rate on credit cards and loans. 

The minimum payment is the smallest amount you’re required to pay on your credit card each billing cycle. Minimum payments are usually calculated based on your monthly balance. So if you max out a credit card, your balance will go up. That, in turn, will likely raise your minimum monthly payment. 

Keep in mind that if you make only the minimum payment each month, it can drag out the time it takes to pay off your balance. That’s especially true if you continue to use the card once you have available credit again. It also means you’ll wind up paying more in interest charges.

If you’re not able to pay your balance in full, making at least the minimum monthly payment on your credit card can help you avoid penalties and fees.

When you max out a credit card or exceed your credit limit, your credit card issuer might raise your interest rate for that card. This is commonly known as the penalty rate. The high interest rate can make your payments higher as well, which could further affect your finances.

Now that you’ve read about how a maxed-out credit card can affect your credit score and financial situation, you may wonder how to get things back on track. Here are some things you can do:

If you’re unable to pay off your credit card balance in full every month, there are two popular methods for paying down debt that could help.

The debt snowball method focuses on small victories when tackling your credit card debt. When you use this method, you’ll make at least the minimum payments on all your accounts. But you’ll focus on paying off your smallest debt first, followed by the next-smallest debt and so on until you’re debt free.

The debt avalanche method works differently. Using this method, you concentrate on paying off the highest-interest debt first while still making at least the minimum payments on your other accounts. When you’ve paid off that highest-interest debt, you put that money toward the debt with the next-highest interest rate. 

Setting up a budget can help you stay on track with your spending. It also helps you identify areas where you can cut expenses. In the end, a budget can be a solid defense against maxing out your credit cards. In fact, a budget worksheet can be helpful in this situation. 

As you’re working on your budget, you might consider establishing an emergency fund that covers your living expenses for at least three to six months. This money can be beneficial when you’re in a financial bind and you’re tempted to max out your credit cards.

If you feel stuck and not sure where to start, you might consider credit counseling. A nonprofit credit counselor could help you develop a budget and get a better handle on your debts. The Federal Trade Commission offers several tips to make sure you choose a trustworthy credit counselor that’s right for you. 

You might also consider the Capital One Money & Life Program.* It’s not a credit counseling service, but the program can help you identify ways your goals in life connect to your finances. The program offers self-guided exercises, one-on-one mentoring and on-demand workshops to support your financial well-being. It’s free for everyone, whether you bank with Capital One or not.

You might want to look into debt consolidation through a balance transfer or a loan. This allows you to combine debts into a single monthly payment. Ideally, the interest rate on the loan or balance transfer would be lower than what you’ve been paying on the accounts you’re consolidating.

If you’re able to pay your balance in full each month and have outgrown your credit limit, you could look into a credit limit increase or a new card. Federal regulations require that credit card companies use up-to-date income information when considering an account for a credit limit increase. So check your account details at least once a year to make sure they’re up to date. Your lender may want information like your total annual income, employment status and monthly mortgage or rent payment. 

If you decide to request an increase, keep in mind that budgeting could help you keep track of your spending and help prevent maxed-out credit cards. 

If you’ve maxed out a credit card, you may still be able to make some purchases with it. That could put you even further into debt. In this situation, it can help to stay aware of your card’s balance and track your expenses to avoid nonessential purchases.

Maxing out a credit card can also max out your emotions and finances. It can trigger declined transactions, hurt your credit score and increase your minimum monthly payments. But there are ways to get back on track. For example, you could do things like sticking to a budget and working to pay off your credit card balance in full every month.

If you’re worried about how a maxed-out card could impact your credit score, you may want to sign up for CreditWise from Capital One. With CreditWise, you can monitor your credit health for free without hurting your credit score. And anybody can use CreditWise, even if they’re not a Capital One customer.