So you’ve maxed out your credit card — now what?

Written by
Geoff Williams
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You’ve maxed out your credit card and you can’t pay it off. At least not at the moment, which means you need a plan.

Fortunately, there are a lot of strategies for paying off maxed out credit cards. I know because I’ve tried just about all of them. Back in the 1990s, when I was in my 20s and long before I started writing about credit cards, I made just about every money mistake in the book and did a lot of stupid things with my credit cards. With that said, I’ve utilized all of the following plans before with varying success. None of them are easy, unless you can adopt the “find a rich benefactor to pay off my maxed credit card” plan, which, sadly, is not a strategy I have been able to use. Still, if you don’t have a rich friend or family member to pay off your debts, hopefully one of these plan options will work for you.

Best ways to pay off maxed out credit cards

Apply for a balance transfer credit card

Who it is for: Balance transfer credit cards are usually reserved for people with good credit, so this is a good plan for anyone with a relatively high credit score who needs some extra time to pay off a balance without worrying about interest charges.

What it is: The balance transfer plan is when you transfer your credit card debt from one credit card to another credit card that allows you to carry that debt with a low interest rate, or better yet, no interest rate, for a set period of time.

There are a lot of excellent balance transfer credit cards which offer an intro 0% APR period before the regular APR applies. This means you can transfer your existing balance and take the time you need to pay down your balance without having to worry about drowning in interest charges. Just remember to pay off your balance, or pay it down as much as possible, before the introductory period expires, as the card’s regular APR will apply to any remaining balances on your account once this period is over.

Something to consider: Most credit cards have a balance transfer fee, usually 3% or 5% of the debt that you’re transferring to the card. So if you have $5,000 that you’ll transfer from one high interest card to one with low or no interest, you would be charged $150 or $250. If you carry $7,000, you’d be charged $210 or $350. And so on.

It’s no fun to pay these fees, of course, but there’s often no avoiding them – and if you pay a few hundred bucks in a balance transfer fee but save thousands of dollars in interest charges, it’s going to be well worth it. Still, when you work out the math and decide whether you want to transfer debt from one card to another, you want to be aware of that balance transfer fee.

And if you’re struggling, what you can’t let happen is a scenario where you transfer all of your debt from one card to another – and then you also start racking up debt on the credit card you just brought down to zero. Once you transfer your debt, do your best to stop making any new charges to any of your cards until you can get your debt under control.

Always pay off more than your minimum balance

Who it is for: Anybody carrying credit card debt.

What it is: Hopefully you already know that if you make only the minimum payment on your credit cards, your balances will take forever to pay off. So if you’re carrying revolving debt and can’t pay it all off at once, and you have to do it gradually, do everything you can to make sure that you pay more than your minimum balance due each month. The more money you pay a month, the faster out of debt you get.

Something to consider: You always want to pay attention to how much interest you’re paying on your credit cards. The reason you want to get your credit card debt paid off as fast as you feasibly can is so you pay less interest. If you don’t know how costly your credit card interest is, use an online credit card interest calculator to calculate your costs. You’ll enter numbers like your credit card balance and your card’s interest rate, and you can see how much interest you’ll pay, depending how much you pay each month.

Debt snowball method

Who it is for: Anyone carrying a balance on multiple credit cards.

What it is: This is where you pay off the smallest of your loans as quickly as possible. Let’s say that you have three credit cards with $1,000, $2,000 and $3,000 on them. And let’s assume that the card with $3,000 has the highest interest rate. If that’s the case, technically the math works out where you should pay off the $3,000 credit card first, but you personally may feel better, and as if it’s more achievable, to first kill off the $1,000 debt.

Here is how the debt snowball method plan works:

  • You make the minimum payments on the $2,000 and $3,000 credit cards – and with the $1,000 credit card debt, you throw as much money as you can at it every month.
  • As soon as that $1,000 debt is paid off, focus on paying off the credit card with the $2,000 debt and continue to make the minimum payments on the $3,000 card. (And this is important: All the money that you were hurling at the $1,000 debt, you now take that and throw it at the $2,000 debt.)
  • Once that is paid off, you focus on the last card, which hopefully by now is quite a bit less than $3,000, since you’ve been making those minimum payments. (And all the money you were throwing at the $2,000 debt is now aimed at this last card.)

Something to consider: Make sure that you don’t get so excited to see one credit card’s debt go down that you forget to make the minimum payments on the credit cards that you aren’t focusing on.

Debt avalanche method

Who it is for: This is also for anyone carrying a balance on multiple credit cards.

What it is: This is sort of the opposite of the snowball plan. Instead of focusing on the credit card with the smallest amount on it, you focus on paying off the credit card with the highest interest.

Let’s try and make the math easy and assume that you have three credit cards, and they all have $3,000 on them. The first credit card is charging you 16.49% interest, the second card is charging you 22.24% and the third is charging 26.99%. (Credit cards rarely seem to give you a nice, rounded interest rate, like 15%.)

So in this example, you have three credit cards, all with $3,000 on them, but with the avalanche method, you would make minimum payments on the two cards with the lower interest rates and divert the rest of the money you have earmarked for debt to pay off the card with the 26.99% interest rate.

Once that is paid off, then you take all of the money you were spending on the 26.99% interest rate card and shove it to the 22.24% interest rate card. And after that’s paid off, obviously you take your money and pay it toward the final credit card.

Something to consider: You can always go with a do-it-yourself model and make double or triple minimum payments on each credit card, instead of focusing on one single credit card. The important thing is to have a plan to bring down and eliminate your credit card debt, and to stick with it.

Go to a credit counseling service

Who it is for: Anyone drowning in debt and finding it almost impossible to pay their credit cards off.

What it is: You want to think a little before you try this plan, but the fact is, if you’re thinking about going to a credit counseling service, you may need one. You’ll want to work with a credit counseling service that is associated with the Financial Counseling Association of America or the National Foundation for Credit Counseling. Even then, be sure to do your research on whichever nonprofit you plan on working with. You don’t want to find yourself working with a crediting counseling service that is shady or has a ton of bad reviews (there will probably always be a few disgruntled reviews since being in debt is very stressful).

You also want to make sure you’re working with a credit counseling service and not a debt settlement provider. Working with debt settlement companies, which often charge an upfront fee to settle debts and can’t always settle them, can be a gamble.

Typically, people go to a credit counseling service at the point where they’re falling behind on their credit card payments and maybe other payments as well. But, sure, you could go before things start falling apart, and you can probably get some good advice from a credit counseling service without actually working with them.

Once you team up with a credit counseling service, the nonprofit will work directly with your lenders – which could be credit card companies, a student loan lender, a hospital you owe money to and so on. At that point, things do start to happen, but not always good. Your credit card issuers will almost certainly suspend your borrowing privileges, for instance. But that may have already happened…

Plenty of good things should happen, too. For instance, if you’ve been hounded by calls from debt collectors, demanding you pay off your loans, those calls should stop.

Something to consider: Credit card counseling services are nonprofits, but they aren’t necessarily going to be free to work with.

I’m generally a fan of credit counseling services. I used one for a few years in the early 2000s, and they certainly can help alleviate stress and make your financial mess less complicated. However, they often will charge you a monthly fee, so if you’re making, say, a payment of $300 every month to go toward your debts, it can be dispiriting if the credit counseling service is taking, say, $30 of that. (Nationwide, the most you can be charged is $79. The actual amount, though, depends on what state you live in.)

Credit counseling nonprofit employees have to eat, too, and considering the money that they often will help you save – such as stopping late fees from being charged and getting interest rates lowered — if you’re really struggling to make credit card payments and are buried in a mountain of debt, you’re probably going to be better off working with a credit counseling service than not.

Frequently asked questions about maxing out credit cards

What happens when you max out your credit card?

Right away, nothing much happens. You simply can’t use your card any more. Or if you have $10 left on the card, yes, you can buy something for $10 (but at that point, just don’t). Soon, however, your maxed out credit card can bring down your credit score, which could make it harder to apply for more credit cards. Lenders understandably get nervous about allowing cardholders to apply for a new credit card if the ones they have are maxed out.

Is it bad to max out your credit card?

It isn’t good. Lenders like to see borrowers borrow no more than 30% of their available credit, and some experts suggest not borrowing more than 10%. That’s because lenders – rightly or wrongly – see a borrower as more responsible and less likely to get into financial trouble if they aren’t borrowing a lot of money and maxing out their credit cards. And they may have a point.

You aren’t a bad person for maxing out your credit card, and you may have good reason for maxing it out. But certainly, it’s better for your financial health if you can get your credit card or credit cards fully paid off as soon as possible.

Does maxing out your credit card hurt your credit score?

Yes, though it’s impossible to say how much your credit score will drop if you max out your cards. Everybody’s financial situation is different, but some experts suggest that it could drop by close to 50 points. Still, it also depends on whether you have one credit card that is maxed out or four, and how quickly you get your credit card paid off. No need to panic right away, but if you’re able to pay off a maxed out credit card in record time, you should.

How do you keep from maxing out your credit cards in the first place?

You always want to pay off your credit cards in full every month. Whatever you borrow, you pay off. It’s that easy. Except, as we all know, when it comes to managing our money and cash flow, it’s not always that easy…

When it comes to spending with credit cards, it’s important to only spend what you can afford. Treat it like a debit card. If you know you only have $5,000 in your bank account that can go towards credit card purchases, do not charge more than $5,000 to your credit card. Emergencies happen, of course, and credit cards can come in really handy in emergency situations, but on a daily basis, you can prevent yourself from maxing out your credit cards and digging yourself into deep debt if treat your credit card like cash.

The bottom line on maxing out your credit cards

If you can avoid maxing out your credit cards, do yourself a favor and don’t do it. It can be very hard to dig yourself out of that financial hole once you’re in it. Still, sometimes maxing out a credit card is unavoidable. Your car breaks down and you don’t want to walk to work, and borrowing from friends or family isn’t a very appealing option, and you have available credit. So you use it. But the moment you do max out your card or cards is the moment you should have one main financial goal: pay off that debt.

When your credit cards are fully paid off, that’s when the magic happens. That’s when you can buy stuff and earn rewards, and suddenly your credit cards are saving you money instead of costing you money. And, of course, maxed out credit cards can do a number on your credit score and bring it down considerably, so it’s always in your best interest to “unmax” a credit card, fast.

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