Steps to Take if You Have Maxed Out Your Credit Cards

worried woman with credit cards on the table.

When credit card issuers give someone a credit card, they place a credit limit on the account. The credit limit is the highest outstanding balance a person has and, essentially, how much they can spend on the card. Borrowers are generally advised not to spend so much on a credit card that they ‘max it out,’ or spend every available cent on their card; doing so lowers a person’s credit score, as the credit reporting agencies will factor in the amount of credit a person is using when determining the score.

When borrowers max out their credit cards every month, it is also a signal that they are spending beyond their means and making purchases they cannot afford. Maxing out a credit card is one of the most harmful things a person could do to their finances. For this reason, it is important that all borrowers not only try to avoid maxing out their card, but also the steps to take when it happens.

Stop Spending

In many cases, once a person has maxed out their credit cards, they are unable to spend any more on it because the credit card issuer will not allow it. However, that is not always the case. Sometimes, a credit card issuer will allow additional charges to be added to a card, which will only add to your overall balance and cost you more in the end.

Many people stop taking their credit card out when they are shopping after they have maxed it out, but there are other ways you may be spending on your card that you may have forgotten about. For example, you may have a subscription that automatically charges your credit card, or you may have your credit card set up for one-click purchases. Review your last credit card statement and look for any charges you may have not considered so you know which payments to stop.

Make More than the Minimum Payment

It is easy to think that only making the minimum payment each month will keep you and your account in good standing with the credit card issuer. That may be true, but making only the minimum payment will hurt you in the end. For example, if you have a card with a $5,000 credit limit, and the annual interest rate is 20.21 percent, it will take over 45 years before it is paid off if you only make the minimum payment. During that time, you will incur more interest and increase your minimum payment, which will cost you much more.

To determine how long it will take to pay off your card in full, use a credit card repayment calculator that will show you how long it will take. Then, change the minimum payment to the amount you can afford to pay every month to determine how long it will take to pay off your card using a higher amount. A budget is critical when determining how much you can afford to pay off so if you have not created one yet, now is the time to do so.

Create a Payment Plan

Once you know how much you can afford to put towards your credit card every month, you can then create a payment plan. It is not necessary to make a payment plan with the credit card issuer, but having one written down can help keep you accountable and see in black and white how much you should pay every month. Of course, even though you may have a payment plan, you should always pay more than what you have allotted if you receive a tax refund or other source of income that can be used to pay down the debt.

Lighten Your Debt Load

Not everyone who has maxed out their credit cards has a low credit score. If your credit score is still considered fair or good, you may be able to transfer your current balance to another card. Many credit card issuers offer a zero percent APR on balance transfers for a certain period of time, which will maximize the impact of your payments. When interest is not added to your balance every month, the full amount of the payment you make will reduce your credit card balance, giving you more room within your credit limit.

Another viable option for lightening your debt load is to apply for a personal loan. If you are approved for this type of loan, you can use it to pay off your credit card. You will still owe the same amount on the personal loan, but you will also have a fixed monthly payment and a fixed payment schedule. Personal loans also typically have a lower interest rate and a shorter repayment period. When using a personal loan to pay off your credit card, try not to use your credit card so you do not max it out and have two debts you have to pay, instead of just the one.

Ask the Credit Card Company for Assistance

Calling the credit card company is often the last thing a person wants to do when they have maxed out their credit card. However, calling the credit card issuer can be very helpful. The company may be willing to lower your interest rate, so more of your payment goes towards the balance instead of paying off interest charges. Some credit card issuers also offer hardship options when a borrower is unable to make even minimum credit card payments.

Call a Debt Defense Lawyer in Florida

When a person has maxed out their credit cards, it is usually not long before a creditor takes legal action, particularly if the borrower has not made payments in awhile. If a creditor or debt collector has threatened to take legal action against you, our debt defense lawyers in Fort Lauderdale are here to help. At Loan Lawyers, our skilled attorneys know the defenses available in these cases and will use them effectively to give you the best chance of a favorable outcome. Call us today at (954) 807-1361 or fill out our online form to schedule a free consultation and to learn more about your legal options.

Loan Lawyers has helped over 5,000 South Florida homeowners and consumers with their debt problems, we have saved over 2,000 homes from foreclosure, eliminated more than $100,000,000 in mortgage principal and consumer debt, and have recovered over $10,000,000 on behalf of our clients due to bank, loan servicer, and debt collector violations. Contact us for a free consultation and find out more about our money back guarantee on credit card debt buyer lawsuits, and how we may be able to help you.