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How Maxing Out a Credit Card Can Hurt Your Credit… Even If You Pay It Off

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Paying with plastic can make shopping seem easier — and money seem endless. But credit cards come with a credit limit, or maximum amount that you can charge. Spending up to your limit is often referred to as maxing out your credit card and it’s not necessarily a good idea to spend up to your limit — even if you can afford to pay off your bill in full. Credit card debt can be hard to pay down and the interest can build quickly. Check out the consequences of reaching your credit limit.

Your Credit Utilization Increases

Your debt-to-credit ratio, also known as your balance-to-limit ratio or credit utilization rate, is the percentage of your available credit you are using. You can calculate your utilization ratio on your own. You simply divide your balance by your available credit line. Most credit experts suggest keeping your credit utilization rate below 30%, and less than 10% is even better. For credit-scoring purposes, credit utilization is calculated both by individual card and overall revolving credit. Potential lenders see a higher ratio as a potential red flag and you may have trouble getting approved for a loan or mortgage if yours is high.

To improve your debt-to-credit ratio you can pay down your debt or increase your credit limit. Either option (or both!) will lower your ratio. A third option may be to make multiple payments during the month to keep the balance owed at 30% or less of your limit.

Credit Score Drops

Maxing out your credit cards will lead to your credit scores taking a hit. After all, your credit utilization rate counts for roughly 30% of your credit score. Further, lenders look at how you have handled credit in the past before approving you to borrow for big purchases like mortgages or car loans. Even if you are approved, a lower credit score means you won’t get as good of an interest rate as you could have. Finally, it can take years to repay your credit card, especially if you only pay the minimum each month. (If you’re not sure how your credit utilization is impacting your scores, you can get a free credit report snapshot from Credit.com to see where you stand.)

When you get a credit card, it’s important to commit to use it responsibly. To avoid maxing out your credit card, know your limit and keep track of your spending.

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  • Mark D. Budka

    That’s actually a good thing to know and is a great thing to put into practice. I love it! Thank you!

  • EdInBoca

    I’ve never known any of this to happen. Quite the opposite. I consistently pay off balances very quickly and I’m often “maxed out” because i travel a lot. The only thing that has ever happened is they automatically raise my credit limits! Go figure. I have a 750 FICO and have stayed between 730 and 780 for the past 5 years..

    • Mark Emanuel

      If you’re referring to Boca Raton, I’m sure it’s easier to maintain a FICO score there than say East St.Louis!

      • EdInBoca

        How is that? Not everyone in Boca Raton is wealthy.

  • Jeffery Surratt

    Credit scores are used to charge the lower income borrower a higher interest rate. Thus makes more money for the banks and that is what it is all about. My sister has worse credit habits than I do but makes 3 times as much 20K vs 60K and she always get better interest rates on credit cards and auto loans than I do. She has several charge off credit cards, and still gets better rates. My Credit Card utilization rate went from 48% to 59% in 3 months and I always pay more than the minimum payments and my score dropped 25 points. So, I am thinking 50% or above has a trigger to lower your score.

    • http://www.credit.com/ Credit.com Credit Experts

      Most experts advise using no more than 30% of your credit limit, and lower is even better.

      • EdInBoca

        I never understood the logic in that. What’s the point of having a credit card if you’re going to get penalized for using the darn thing? What’s the point of having a high credit limit if you have to be afraid not to use more than 30% of it? I don’t hear them complaining about all the interest they make no matter what your balance is. Credit card companies make money on the credit you use. Why would they balk at making more money? Maybe they should be penalized for charging too much interest. If I have to use only 30% of my limit, I don’t need a credit card. I’ll just use a debit card and be done with it. This is all so ridiculous.

  • teejerman

    What genius is advising us by saying “it’s not necessarily a good idea to spend up to your limit — even if you can afford to pay off your bill in full.” If you can pay your ‘maxed out’ credit in full, how is this a liability? Ridiculous…

    • http://www.credit.com/ Credit.com Credit Experts

      Certainly, you CAN do that, but it can hurt your credit utilization, and depress your credit score. It’s a valid choice, but it if you are going to do this, it’s good to be aware of potential consequences.

      • EdInBoca

        There should be no consequences. You were given a credit limit to USE it. Who decided there would be consequences for using it? This is just another way for credit bureau’s to validate their existence and self-importance.

  • MiggyCabby24

    Fico scores are a bunch of crap. Negative circumstances happen to people all the time, through no fault of their own, and a number shouldn’t determine a person’s worthiness or intentions in-regards to paying their bills.

    • 初音 みやび

      Negative circumstances happen sure, but the reality of it is: there is no other way to truly determine if you’re responsible. And honestly, having a car loan, credit cards, even a damn cell phone bill – those are YOUR responsibilities. No one else’s. If you cannot pay bills, a car loan or pay down your credit cards, that’s not aby one else’s fault.

  • Kingsley

    I did a balance transfer from BOA to Chase. During the paying off of my balance a $10 purchase I made before didn’t post on my account and it wasn’t paid off by chase. Unknowingly to me I missed that payment and my credit score drop by 56 points. What do I do?

    • http://www.credit.com/ Credit.com Credit Experts

      You can call the first bank, make sure the debt is paid and ask them not to report it. (They may not honor that request, but it can’t hurt to try.) Are you saying they failed to send you a bill? Or that you overlooked it because you believed it had been paid? You can read more here:
      How Much Will One Late Payment Hurt Your Credit Scores?

      • Kingsley

        I overlooked it because I thought that it has been paid. They said though the purchase was before the balance transfer but it posted afterwards. This is my first missed payment ever and it dropped my credit report by 56 (708 – 652) points. The worst is I have a 100% payment record before this mix-up and it is going to affect my application for student loan next year. Any chance the credit reporting agency can do anything about it.

        • Jeanine Skowronski

          Hi, Kingsley,

          Generally, the bank, not the credit bureaus, would need to agree not to report in order for the information to remain off of your credit report.

          Thank you,


  • David Mann

    Before I got my home loan I got 2 secured credit cards. I fully agree with the statement of keeping the amount due below 30%. I had my cards almost maxxed & when I paid them down my score jumped over 100 points. I did not have much on my credit report so these 2 cards seemed to control my score. I was amazed by how much of an affect it has on your score. The cards I had were only for $300 each so paying the off was easy, the downside is that it is very easy to max them out too.

    • EdInBoca

      ….and that shouldn’t be a downside. The credit bureau’s created the downside. This is the 21st century. It isn’t rocket science to understand that $300 is nothing anymore but they want to add insult to injury by penalizing you for using more than $90 on the card. We definitely need credit reform in this country. Credit bureau’s have WAY to much power.

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