Charging too many expenses to your credit card can happen occasionally. It leads to whats called a maxed out credit card, meaning youve gone over or are close to being over your assigned credit limit.
It doesnt mean your financial world will come crashing down around you. But it is something to take notice of and deal with.
Its okay to have a maxed out credit card if you plan on paying it off when your next credit card bill arrives. However, when your APR is applied to the balance, you may be over your credit limit.
A quick way to resolve this"especially if you need to make more purchases on your credit card or have services such as Netflix or a gym membership that automatically charges to your card each month"is to call your credit card provider and ask for a higher credit limit.
Without it, your next transaction could be denied if youre over your credit limit. Some issuers allow over-limit transactions, and a fee may be charged for going over the credit limit. Along with the fee, youll have to make a minimum payment on the card when the bill arrives.
Having a maxed out credit card can cause a credit score to fall. Credit utilization makes up 30 percent of a credit score. Its a measure of how much credit youve used. Using 10 – 30 percent of a credit limit is recommended, and maxing out a card is using 100 percent of the available credit.
Once youve found out that your credit card is maxed out, paying it off in full as soon as you can is your best solution. If you cant do that, asking for your credit limit to be raised is another step.
If none of those steps bring you success, focus on paying off as much of the balance as possible"and stop using your credit card until then.
You may also need to work out a repayment plan with your creditor, or with multiple creditors if youve maxed out multiple credit cards. This can require juggling your finances, such as taking out a personal loan or doing a balance transfer from one credit card to another that has a lower interest rate.
Even if you cant afford to pay off a maxed out credit card quickly, it shouldnt be a reason to panic. Stop using the card and pay it off as much as you can each month, and hopefully in a few months, your maxed out card wont be maxed out anymore.
This article is intended for informational purposes only and should not be construed as professional advice.
Published with permission from RISMedia.