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By: AgFed Credit Union

Welcome to AgFed Credit Union's MoneyDig blog! 

Get confident about your personal finances with a number of articles, tips, advice and more.


What Happens If You Max Out Your Credit Cards?

 Nov 09, 2021
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Credit cards give you the convenience and freedom to shop practically anywhere, either online or offline, at any given time. However, this type of freedom can also create many financial hardships if not managed responsibly.  

It’s the convenience of credit cards that leads many to rack up high levels of debt. As balances increase, so do minimum payments, along with the possibility of falling into a debt cycle that is hard to manage. Should you find yourself already to the point of maxing out your credit cards, there are ways you can recover while improving your credit score in the process.


What Is a Maxed-Out Credit Card?

Each credit card has a limit that specifies the amount that the cardholder can spend on the card. Once this maximum limit is reached, the card owner can no longer make purchases because it is 'maxed out.'


What Happens When You Max Out Your Credit Card?

If you find yourself with a maxed-out credit card, you may:

  • Be denied any future transactions using the card.
  • Notice an increase in minimum payments.
  • Be penalized for spending over the credit card limit.
  • Realize a drop in your credit score.
  • Land yourself in a vicious debt cycle.


How Does a Maxed Credit Card Affect Your Credit Score?

A good rule of thumb is to keep your credit usage at or below 30%. What that means is if you have a credit card with a limit of $10,000, you don’t want the balance on your card to exceed $3,000 consistently. This credit usage is known as your “credit utilization ratio” or CUR.

Your credit utilization ratio has a direct effect on your credit score. If your CUR is 100%, you’ll likely notice a drop in credit score. In addition, lenders use this ratio to gauge how well you manage debt and the credit extended to you. If you have maxed-out credit cards, it may look as though you’re in financial trouble – decreasing your chances of obtaining more credit in the near future.


What to Do When You Have a Maxed-Out Credit Card

Having a maxed-out credit card isn't the end of your journey to financial freedom. Instead, you may just need a little help creating a repayment plan and getting back on track. Consider these initial steps:


1) Stop Using the Card

Some credit cards may allow transactions to go through even after the limit is reached. However, spending more on your maxed-out credit card only attracts additional debt, more interest, and possible penalties. For these reasons, you'll need to stop using the card immediately and begin planning how to repay your debt.


2) Re-Evaluate Your Budget

Next, begin reviewing your spending habits. If your credit card is maxed out, the interest charges you incur monthly will likely be high. As a result, you’ll want to cut as much unnecessary spending from your budget as possible. While these cuts do not have to be permanent, it’s wise to re-evaluate all your spending to identify how you initially got to this point. 


3) Tackle Your Credit Card Debt

While your credit card debt may feel overwhelming, there are effective ways to reduce your debt.

  • Consider a credit card balance transfer. A balance transfer involves moving your high-interest credit card balances to a new card with a lower interest rate. By doing this, you’ll be reducing the overall amount of interest you are paying each month. Instead, you can now use those funds to pay more towards your principal balance and lower your debt level.


  • Look into a debt consolidation loan. Similar to a credit card balance transfer, a debt consolidation loan allows you to transfer your high-interest debt to a lower-rate loan. However, with a debt consolidation loan, you’ll have set monthly payments designed to get you out of debt quicker and avoid paying excess interest.


  • Use credit counseling or debt relief services. You may need credit counseling and debt relief services to help you create a plan to decrease your amount of debt. However, before hiring a credit counseling or debt relief service, be sure to verify their credibility with the state's Attorney General and your local consumer protection agency.


  • Consider a credit card hardship program. Some unavoidable life situations, such as unemployment or sickness, may be the reason you have a maxed-out credit card. In that case, a credit card hardship program could come in handy. With this type of plan, your lender agrees to give you a break from making further payments for an agreed period. Alternatively, the lender may also give you a break on the interest rates for some time to help you recover financially. Be sure to check with your lenders to see if there are options such as these to help you get back on financial track.


We’re Here to Help!

Having high levels of debt can feel overwhelming. However, with planning and discipline, it is possible to get your finances back on track. As your credit union, we offer a variety of plans and options that can help you reduce your debt and better your overall financial outlook. Please email us at or give us a call at 202-479-2270 to learn more about our different debt consolidation options.

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