Do’s and Dont’s When You’ve Maxed Out a Credit Card

Maxed out a credit card

As a general rule, your credit utilization should be no more than 30%. A higher credit utilization can ding your credit scores, making it hard to open new lines of credit or get the best interest rates.

Maxing out a credit card, or charging nearly the full amount of your limit, is never a good idea. Of course, it can and does happen from time to time.

If you’ve maxed out a credit card, there’s no need to panic. Maxing out a credit card doesn’t mean that your credit score will plummet over night. It is, however, important that you take steps to pay your credit card balance sooner rather than later to prevent future credit and financial problems.

Here are a few do’s and dont’s to keep in mind when you’ve maxed out a credit card…

#1. DO make more than the minimum payment. 

Making the minimum payment on your maxed out credit card will cost you an arm and a leg in interest. You’ll pay off your maxed out credit card balance must faster if you make more than the minimum payment.

#2. DON’T make any late payments. 

If a maxed out credit card doesn’t make your credit score take a dive, late payments will. Maxing out a credit card can be pretty overwhelming, but ignoring the problem will make it worse. Even a minimum payment is better than a late payment or no payment at all.

#3. DO make budget cuts. 

Free up a little extra cash in your budget to make extra payments and pay off your maxed out credit card faster. Cut out any unnecessary expenses, like dinners out or movies, and put this extra money toward your balance.

#4. DON’T continue to use your card. 

Having a maxed out credit card is bad enough, but going over your limit is even worse. Once you’ve maxed out a credit card, it’s best to just stop using it altogether, at least until you’ve paid it off. Take the card out of your wallet completely to help resist the temptation of using it.

#5. DO consider transferring your balance. 

Some credit card companies offer a 0% introductory rate on new balance transfers for a specific period of time, usually 12 months but sometimes as long as 18 months. If you have good enough credit, opening a new card and transferring the maxed out balance may be an option. The 0% introductory rate means that you’ll be paying more toward the actual balance and less in interest. You may still have a maxed out balance on the new credit card, but the interest charges won’t rack up. Divide the balance of your maxed out credit card by the introductory rate period to determine how much you’ll need to pay each month in order to pay off your balance without paying interest.

#6. DON’T forget to sock away emergency funds. 

Putting every last dime you have toward your maxed out balance may seem like the best way to play it, it can actually be a pretty big mistake in the long run. Make sure you’re still socking away money in your emergency fund. This way you’ll still have some funds available in case of a financial emergency when you need cash fast.

#7. DO reach out to the credit card company. 

If you have a good history of paying your credit card on time, it doesn’t hurt to reach out to the credit card company and ask for a credit limit increase. This will lower your credit utilization a little and possibly prevent a lowered credit score. Getting a credit limit increase doesn’t mean that you can go on a shopping spree with the previously maxed out card, though. Continue to make more than the minimum payments and don’t use the card until you’ve paid down the balance.