8 Ways to Rebound from a Maxed-Out Credit Card

Credit cards give you the freedom and convenience to shop online or offline whenever you want.

This type of freedom can, however, create financial hardships if abused. Consumers who use their cards too often or fail to make payments end up racking up high levels of debt. With increased balances comes increased minimum payments, ultimately leading to a debt cycle that’s hard to get out of. 

But no matter how much credit card debt you’re in or how many cards you have maxed out, with discipline and consistency, you could find yourself debt-free again. 

But First, What Does It Mean to Max-Out a Credit Card?

Every credit card has a limit that stipulates the amount that the cardholder can spend on the card. 

Creditors establish these limits to protect the company. New customers typically get lower limits that can increase over time as they establish a history of on-time repayment and their credit scores improve.

Once you reach this maximum limit, you can no longer make purchases because it is “maxed out.” For instance, if your card’s credit limit is $10,000 and your balance is $10,000, the card is maxed out.

If this happens, you may: 

• See a drop in your credit score
• Realize an increase in interest and minimum payments
• Be barred from making any future transactions using the card
• Receive a penalty for spending over the limit

8 Ways to Rebound from A Maxed-Out Credit Card

Few things are as awkward as having your credit card declined by the cashier in front of a long queue of impatient shoppers.

If you’ve maxed out your credit cards, you’ll be glad to know that damage from a maxed-out credit card isn’t permanent

The following strategies could get you on the path to repayment and financial stability:

• Stop Using the Card Immediately

Some credit cards let users continue transacting even after the limit is reached.

Spending more on your maxed-out card, however, only attracts more interest, possible penalties, and additional debt. 

For these reasons, it’s advisable you stop using the card and start planning how to tackle your debt. Otherwise, you will continuously accumulate a higher balance.

Also, avoid the temptation of applying for new credit until you get a handle on your current credit card debt. The only exception to avoiding new debt is using it to tackle your credit card debt (more on this below). 

• Re-Evaluate Your Budget

Assuming you already have a budget, it’s time to re-evaluate it.

If you don’t have one, start reviewing your spending habits. Taking inventory of all the things you spend money on will help you identify how you got yourself to this point in the first place.

If you’ve recently had a personal or financial emergency, the costs associated with it could be significant and could be why you spent so much on your cards. In other cases, you may be making expensive purchases, such as shopping for designer items or eating out at fancy restaurants often, that you simply cannot afford on your monthly income.

Maxed-out credit cards come with high-interest charges, so you want to reduce as much unnecessary spending from your budget as you can and put the extra money toward repaying your credit card debt.

• Supplement Your Income

Maxing out your credit card means you’re probably spending more than you have in available discretionary cash. 

Having extra cash every month will let you put more toward your outstanding debt.

To create additional income, consider finding a side hustle, taking a part-time job, or starting a business you can do in your spare time.

Try to use as much of the extra income you have every month to pay down your credit card debt. 

• Debt Avalanche/Debt Snowball Approaches

With extra income and a new budget, you should have a general idea of how much monthly payments you can afford to make.

Two popular methods of getting rid of credit card debt are debt avalanche and debt snowball. 

The former involves paying back the credit card debt with the highest APR first, saving you money on interest payments over time. 

The latter involves making minimum payments on all your cards every month and putting any extra money toward the credit card with the lowest balance, effectively reducing the number of cards with balances faster.

• Look into A Credit Consolidation Loan

Setting up a repayment plan is essential in tackling your credit card debt. A debt consolidation loan lets you transfer your high-interest debt to a lower-rate loan. 

If you have multiple cards maxed out, consolidating your existing balances will help you save money and get ahead of your debt. By setting monthly payments, you’ll get out of debt quicker and avoid paying excess interest.

You should, however, avoid spending on your freed-up credit card lines to make this method work.

• Consider A Credit Card Balance Transfer

A credit card balance transfer involves moving your high-interest balances to a new card with a lower interest rate. 

Moving your balance to a card with a 0 percent introductory APR will reduce the overall amount of interest you’re paying every month, and you can direct those funds towards paying your principal balance and lowering your debt level.

We recommend this method if you’ve paid off some of your balance and your credit score has risen (typically a FICO score of 690 or higher).

• Look into A Credit Card Hardship Program

Some inevitable life situations, such as illness or unemployment, could be the cause of your maxed-out credit card. If that is the case with you, a credit card hardship program could come in handy. 

How it works is your lender agrees to give you a break from making any further payments for a specified period. The lender may alternatively give you a break on the interest rates for an agreed period to help you recover financially. 

Be sure to check with your bank to see if they have credit hardship programs for unforeseen life-changing scenarios.

• Use Debt Relief Services

If you’re having trouble planning your repayment on your own, you may need debt relief services to help you create a plan to decrease your debt. 

Before hiring a debt relief service, it pays to verify their credibility with your local consumer protection agency.

We’re Here to Help!

Having high levels of credit card debt can feel overwhelming.

Whether this is the first or umpteenth time you’ve maxed out your credit cards, Americor can help you tackle your debt and get your finances back on track. 

One of our experienced debt relief experts will recommend a debt payment strategy that can be a helpful alternative to tackling mounting debt.

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