What It Means to Max Out Your Credit Card

What It Means to Max Out Your Credit Card – In technical terms a maxed out credit card is one that has a credit utilization of 100%.In simple layman’s terms,this happens when you have spent the entire credit available to you and have reached the credit limit on the card.You have a full balance and cannot swipe your card anymore until you pay off some portion of the balance.

For instance,if you have a $500 credit limit on your card,and have used the card for $500 and cannot use it anymore,means it is maxed out or it has reached its maximum permissible usage.

There most probably will be negative consequences of reaching the threshold on your card spending ability.

Can your card go above the credit limit?

Ive seen maxed out credit cards many times when i had to cold call customers having OL accounts – which means over limit cards.These customers had not only maxed out their cards,but because of that had over-limit fees added to it,which further pushed their balances over the credit limit.

Due to HUGE interest that was now charged because of the large balance{Finance charges are directly proportional to your credit balance},the balance went even higher.Now both the over-limit fees,finance charges contributed to the balance exceeding the credit limit.

This was not an uncommon occurrence and most over limit accounts needed immediate payments to get them under the credit limit.

Consequences of Maxed out cards

So the question is – Can you spend more than the credit limit? – No of course you cannot,and the only reason that the balance had exceeded the credit limit in these cases was because the finance charges kept piling up,and even though the customer was paying the minimum due,it was not enough to bring the balance under the limit,and again OL charges were levied.

You see,its a vicious circle or cycle – whatever you prefer,but maxing out your card is a crazy,irresponsible,dangerous and expensive thing to do.Not only does it stop you from using your card anymore or make you pay huge fines and penalties,but it inadvertently has a disastrous effect on your credit score.

Maxed out card Vs Credit Score

In the previous article i told you how credit utilization works and what it means for a card user.Ideally you should use 30%-35% of your card balance,and make payments on the card accordingly to keep it at this level or reduce it,however when your card is maxed out,it means you have used 100% of it.

Your credit score is based on a few factors of your spending,debt and credit habits.Having a high credit utilization of 100% will not go down well for your credit score and might work towards reducing your credit score when reported to the credit bureaus.

 

What can you do to save a maxed out card

First you need to call up customer care or better still when credit card collections gives you a call you need to negotiate. Believe me,collection agents will be more than happy to even get a small payment out of you,and is also a positive step from your end to ensure that you are willing to help reduce the high balance.

Firstly you have to tell them to waive off the OL fees – which they will – in most cases.After that you need to make 2-3 small payments to get the balance lower.

The ideal thing for you to do to save yourself from gigantic finance charges that are mounting,is to make a substantially large payment so that you can continue using  your card immediately again.

 

 

 

 

 

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