It’s true, credit cards take a lot of responsibility and when you are only required to make one payment a month (at a minimum balance), it’s very easy to get ahead of yourself. So, that then begs the question: what happens if I max out my credit cards? Well, first and foremost, credit limits are not meant to be reached and maxing out your credit cards may spark a red flag with the issuer and prompt them to close the account. Why? Because habitually reaching the limit shows that the user is experiencing some kind of financial trouble and is unable to keep up with their expenses. Though, if you are one of the lucky individuals whose account is not forcefully closed down by the bank, you will be hit with a penalty rate and as a consequence, this interest charge will not only last up to six months if you keep up with your payments, but cost you a large chunk of cash that will build upon your already outstanding debt.

Sometimes, people may believe that the solution to credit card debt is to stop making payments or pay less than the minimum amount due each month. Unfortunately, however, paying less than the minimum amount is still considered a missed payment and though an individual cannot be jailed for “civil debts,” refusing to settle your payments will affect you in the long run. The opportunity for loans will be stripped from you, you will be unable to apply for mortgages, and even then, it will be much harder to find an apartment when your credit score has been established by the lack of debt settlement to your credit card.

The Consequences of Maxing out a Credit Card

Even if it takes you a much longer period of time than anticipated, paying off your credit card in full is a much better decision than deciding to completely ignore the piling debt. Though late payments may only drop your score by 100 points and maxing out your credit card drops your score by 200, once you pay off your credit card in full, the damaged credit will be wiped from your record as if it never existed. However, on the other hand, if you were to continue to make late payments/missed payments, your credit score will take a detrimental hit.

At the end of the day, the lesson is to ensure that your credit cards do not reach the limit and keep within a specific budget. Never splurge if you are unable to and always make a timely payment each month. If necessary, set up a reminder or enroll in automatic payments. Your credit score is a delicate piece of information that is utilized by a vast number of institutions in order to define your reliability.

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