What It Means to Max Out Your Credit Card

Understand why it should be avoided

A woman sits across from a huge credit card
••• © Stephen Swintek / Stone / Getty

Credit cards come with a credit limit—the maximum amount you can spend on your card. Ideally, your balance should be well below this credit limit.

When is a Credit Card Maxed Out?

A maxed-out credit card is at, very near, or even over its credit limit. For example, if your credit limit is $1,000 and your credit card balance is $1,000, then your credit card is maxed out. Your credit card balance may end up over the limit if you don't make a payment before finance charges are applied to your account.

When your credit card is maxed out, your credit card issuer may not allow you to make additional charges until you pay down the balance and create available credit. If you exceed your credit limit, you risk being charged an over-the-limit fee and having your interest rate increased to the penalty rate.

What to Do About It?

There are only two ways to correct a maxed-out credit card. One is to get a credit-limit increase, which would give you more room on your credit card. However, your credit card issuer may not be willing to raise your credit limit if you've maxed out the credit limit you already have.

The preferable way to take care of a maxed-out credit card is to pay down the balance as much as you can, preferably in full. If you pay off a significant chunk of your balance, your credit card issuer may agree to a credit limit increase.

You can prevent maxed-out balances by regularly monitoring your credit card usage. You can check your balance at any time online, via mobile app, or by calling your credit card's customer services. Make a conscious effort to keep your purchases below your total available credit to avoid maxing out your credit card. Once your balance starts to approach the credit limit, stop using your credit card and consider making a payment on your account.

Maxed-Out Credit Cards and Your Credit Score

If your credit card is still maxed out by the time your credit card issuer reports your account to the credit bureaus—usually on your account statement closing date—the maxed-out balance could affect your credit score. Nearly one-third of your credit score is based on how much of your available credit is being used, so maxing out your credit card will harm your credit score. Generally, any balance greater than 30 percent of your available credit is likely to have a negative impact on your credit score.

On the other hand, you can pay your balance off before the statement closes, and the maxed-out balance won't be reported to the credit bureaus, thereby saving your credit score.

Maxing out your credit card doesn't always mean that you're an irresponsible borrower. You may have made an intentional decision to charge a high balance on your credit card. For example, you may want to max out your credit card rewards earnings. Or you may max out your credit card to take care of a balance transfer deal. While your credit score may still take a hit from either of these, you can repair the damage by reducing your credit card balance as quickly as possible.