Help! My credit cards are maxed out – what now?


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When you reach a point where your credit cards are maxed out, a whole chain of events begins to unfold, none of which are pleasant.

It’s not a significant issue if one of your credit cards is maxed out. But if several or all are maxed out, that’s a problem. And unfortunately, there isn’t an easy fix, either.

Check your credit score – it may not be pretty

If your credit cards are maxed out, you should get a copy of your most recent credit report and credit score.

Maxing out your credit cards has a major negative impact on your credit score. If you haven’t checked your credit score in a while, you might find that your score has fallen a lot.


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It comes down to your credit utilization ratio. That’s the total amount of credit card debt that you owe, divided by the total amount of your credit limits.

As an example, let’s say that you owe $10,000 on your credit cards, and you have total available lines of credit of $20,000 on all lines. Your credit utilization ratio is 50% ($10,000 divided by $20,000).

The credit bureaus consider a credit utilization ratio of up to 30% to be a positive for your credit score. But beyond 30% the impact is negative, and increasingly so as you approach 100%. This is because they consider the likelihood of credit default to increase as you get close to 100%.

You may find that your credit score has dropped considerably once your credit utilization ratio reaches 70% or 80%. But if you are maxed out, you’re flirting with default, and the impact on your credit score will be heavy. That’s when a lot of bad things start to happen.

Your credit wings may have been clipped

As your credit score declines, due to your high credit utilization ratio, you may find yourself being declined for new credit.

This is because lenders will see your efforts to get new credit as an attempt to find more money to pay your existing debts. This is a red flag that default is possible, and banks may decline your loan applications.

Alternatively, they may offer you highly reduced credit lines, at high rates of interest.

For example, a bank may offer you a $500 credit limit with an interest rate of 23.99%. That probably won’t help your situation, particularly if you had actually planned to use the new credit line to pay your existing credit cards.

If this happens when you apply for a new credit card, you seriously need to find out what your credit score is. It’s probably not good news.

But another scenario is likely to play out that’s even more problematic. The credit lines you already have may be cut.

For example, a bank might lower your credit limit on a card to the amount of the outstanding balance. It’s even possible that they might set a credit limit that’s lower than the current balance, and require you to pay your balance down.

You may also find your requests to increase existing credit lines being denied.

All of these outcomes are typical when you reach the point where your credit cards are maxed out.

How are you doing with the monthly payments?

If your credit cards are maxed out there’s a very good chance that you’re struggling to make the minimum monthly payments. At least part of the reason why credit cards get maxed out in the first place is a lack of extra money.

Credit cards can then function as something of an emergency to cover expenses that you can’t pay out of your regular income.

Eventually that cycle becomes complicated by the rising monthly payments on your credit cards. Those payments represent a drain on your income, and put you in a position of constantly being short in your budget each month.

That leads to yet another stage in the cycle, that typically is a sign that the day of reckoning is near.

No More ‘robbing from Peter to pay Paul’

One of the telltale signs of maxing out credit cards is when you use one credit card to make the payment on another.

This becomes necessary due to the fact that monthly payments on multiple credit card accounts are putting you into a situation where you don’t have sufficient income to cover all of your expenses.

You make this up by paying for one credit card with a cash advance from another. Or you charge basic expenses to a credit card, such as groceries or utilities, to free up your paycheck to make credit card payments.

But once you reach the point where your credit cards are maxed out, your ability to use one credit card account to make the monthly payment on another comes to an end. That’s when you are facing a time of very hard choices.

You’ll probably have to decide to pay credit cards on alternating basis – one set of cards gets paid this month, and the rest get paid the following month.

But when that happens, your credit score will take a serious dive, and the negative consequences will accelerate.

You have to get un-maxed ASAP

If you have maxed out your credit cards, or you’re very close to doing so, you must get un-maxed as soon as possible.

A maxed out credit card is a warning flag to a bank to keep a close eye on your account. That’s when you face the possibility of having your credit line frozen, or being denied a higher credit limit. The bank is making a decision that they do not have confidence in your ability to reverse the trend of rising debt.

Practically speaking, maxed out credit cards mean the end of the credit card bonanza. The ease with which you had access to credit is gone. The credit lines turn into a burden with no benefit. Your best option is to seek some type of credit settlement that will enable you to begin reducing your credit card balances in a serious way. You will most likely need legal help make this happen. Otherwise, the credit card companies can make your life difficult as you attempt to get out of debt.

A law firm that specializes in credit will be your best option. They can help you resolve your debt dilemma as quickly and cleanly as possible. This will be especially important if your credit score has already fallen, and even more so if you’re starting to make late payments.

The sooner that you deal with your credit problems, the sooner that you will get back in control of your financial life.

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