Maxed-Out Card

Maxed-out card summary: 

• A credit card is maxed out when it's at 90% or more of its credit limit. 

• A maxed out credit card could hurt your credit scores.

• Debt consolidation and debt settlement could be ways to handle debt that feels unmanageable. 

Maxed-out card definition and meaning

A maxed-out credit card is a card that's close to or at its credit limit. For example, if you have a credit limit of $2,000 and your balance is $1,800 or more, your credit card is considered to be maxed out. It could make it hard to use your card for purchases and may also impact your credit score.

Key concept: You’ve reached (or nearly reached) your credit limit, the maximum amount your credit card issuer allows you to borrow.

More on maxed-out card

You may not be able to make more purchases if your credit card is maxed out. Trying to make purchases on a maxed-out credit card typically results in your card being declined. Some issuers let you opt-in to making over-limit purchases so you don't get declined, but you'll likely be charged an overlimit fee for going over your credit limit.

Maxing out a credit card won't make interest stop accruing. Interest fees can be added to your credit card account even if you're over your credit limit.

Key features of a maxed-out credit card

Maxed-out credit cards happen. In fact, in the past few years, almost 40% of Americans have either maxed out or come close to maxing out their cards. People can max out a credit card for many reasons, including:

• Medical bills

• Car repairs

• Job loss

• Unexpected expenses

If you have maxed out credit cards and don't have the means to pay them back, you may want to consider debt relief options to get rid of your credit card debt.

Maxed-out card: a comprehensive breakdown

Even if you’re a few dollars below the limit, you’re still considered maxed out in practical terms, because you have almost no available credit left. Here's what that could mean for you—and your finances.

Credit utilization impact

If your credit utilization on a card is 90% or more, your card is maxed out. Credit utilization is the percentage of your available credit you are using. For example, if your credit card has a $10,000 limit and you have a $9,000 balance, you have a 90% credit utilization rate.

Utilization is an important part of your credit score, and a maxed out credit card could do a lot of damage. A maxed-out card (close to 100%) signals to lenders that you may be financially overextended or struggling to manage credit responsibly.

The general rule of thumb is to keep your utilization rate below 30%, but FICO says to aim for a utilization rate of 10% or less for the best credit score impacts.

Financial costs

In some cases, you may be charged an overlimit fee. Plus, when your balance is maxed out, interest charges could build up quickly—especially if your APR is high (most cards tend to charge 20% to 30% APR). Making only minimum payments usually means most of your payment goes toward interest, not principal, so it could take years to pay off the debt. 

Limited flexibility

A maxed-out card means you have no borrowing cushion. In an emergency, you can’t rely on that card. Having a maxed-out card on your credit could also make it harder to get new credit, further limiting your options.

Potential account and issuer reactions

If you consistently carry a maxed-out balance, your credit issuer might think you've become higher risk and reduce your credit limit. They might also raise your interest rate under certain conditions or decline new transactions. In serious cases, the issuer could even decide to close your card and demand repayment.

Steps to take if your credit card is maxed out

A maxed-out credit card can be a sign of wider financial difficulties, and debt that’s possibly overwhelming. If so, know that you have options. Start by working out how much you owe and what you're paying in interest to help you decide on the best route for you. 

Here are some options to consider:

• DIY repayment strategies. Make all of your minimum payments, then prioritize any extra money. If you use the debt snowball, focus on paying down the debt with the lowest balance first before moving on to the next-lowest. In the debt avalanche, you prioritize the balance with the highest interest rate. 

• Debt consolidation. You take out a new loan and use it to pay off multiple debts. Works best when you qualify for a lower interest rate.

• Debt relief. Also known as debt settlement, you negotiate with your creditors to settle the debt for less than the full amount. You can do it alone or hire a professional debt relief company. 

Real-life example of maxed-out card

Alyssa has a credit card with a $5,000 limit, and lately, it’s been maxed out. Between groceries, car repairs, and a few unexpected medical bills, her balance has climbed to $4,950. She’s been making only the minimum payments each month, just enough to avoid late fees.

The problem is, with her balance so high, her credit utilization ratio is nearly 100%, which is hurting her credit score. On top of that, the interest charges keep adding up—nearly $100 a month—so it feels like she’s barely making progress.

When her car needs new tires, she realizes she has no available credit left and has to add more debt to another card. Alyssa decides she needs to sit down with her budget and prioritize getting her credit card debt paid off so she can open up her financial options.