It is not uncommon to find yourself in a situation where your credit card has been maxed out. Many times this could happen after the holidays, but often it occurs when we just lose track of our spending. When you have a maxed out credit card, you’ve consumed the entirety of your credit limit. This is the limit set by the bank and beyond this amount you can no longer use the card to make purchases. In fact, attempting to use the card will likely lead to your card getting declined, which can be quite embarrassing. However, the more important concern is what to do next. There are several long-term ramifications of a maxed out credit card.

The Risks of Having a Maxed Out Credit Card

Your debt utilization ratio is a comparison of your credit card balance to your credit limit. So as you can imagine, your utilization increases the more you spend. Once you’ve maxed out your card the utilization ratio is 100%. As we previously discussed, a high utilization can have a negative impact on your credit score. This in turn may lower your credit score and make lenders less likely to work with you. A maxed out credit card also means that mathematically you will have to make higher minimum payments each month than previously. This of course can lead to issues with your budgeting if you’re unprepared. In addition, credit card debt is among the most expensive type of credit available, so carrying large balances is never a good idea. Clearly having a maxed out credit card is not an ideal situation to be in. Taking action sooner rather than later to address it is what we’d recommend. So, here’s what you can do if you find yourself in this situation.

1. Consider a Balance Transfer Credit Card

If you have a low credit utilization ratio, coupled with a FICO score of 690 or higher, you may be eligible for a balance transfer credit card. This card may allow you to transfer your debt from your current card to one that has a higher credit limit or a lower annual percentage rate (APR). In some cases, you may be able to access an introductory APR of 0%. This allows you to make repayments without interest for a defined period. While this solution can help you repay your debt faster, you may have to pay a balance transfer fee of 3% to 5%. However, not all cards don’t charge this fee.

2. Don’t Wait Until the End of Your Billing Cycle

Conventional wisdom states that you can make credit card repayments at the end of your billing cycle. However, this is not a good strategy when you have a maxed out credit card. Waiting until the end of your billing cycle increases the chances of your credit card issuer reporting your status to the credit bureaus. And as we noted earlier, a maxed out credit card means your debt utilization is higher which has a negative impact on your score.

Instead of waiting to the end of your billing cycle, aim to pay off as much of the debt as possible sooner. In fact, as soon as you receive the notice that you’ve maxed out your card you should start making whatever payments you can. Ideally, you’ll pay off enough to place yourself at a credit utilization ratio below 50%. This means you’re only using half of the credit available to you. However, getting back to 50% might not be realistic for everyone. Still, anything that prevents you from reaching 100% has a beneficial effect on your credit score.

3. Cease All Spending on Your Cards

It’s easy to continue spending on a maxed out credit card without realizing it. For example, you may have set up subscriptions using your credit card. Or, you may have it set as the default option for one-click checkout in an e-commerce store. You could also have other automated payments set up. You need to take the time to cancel all of your pre-authorized and automated payments. Move these to a different form of payment or cancel them. Either way, ensure that you have removed your credit card from these services to eliminate the possibility of further charges. While this will not lessen your debt, it does ensure that you don’t add to it in cases where your credit card supplier does not immediately block further charges.

4. Request a Credit Limit Increase

This option is not available to all cardholders. However it is an option that helps increase your ability to spend and also lowering your utilization ratio. Increasing your credit limit can benefit your credit score because of the lower utilization, but this assumes you don’t use up the additional credit. You can request a credit limit increase by contacting your credit card issuer. Your credit card issuers will only approve this request if you have a healthy credit report and a proven track record of on-time payments. If you’re struggling to make repayments and have a checkered history, this strategy is unlikely to work. Regardless, remember that getting a credit limit increase helps in the short term but does not solve the longer term problem. You still need to repay the credit card debt you’ve incurred. In addition, you still will have higher minimum payments. This option just provides some breathing room.

5. Create a Debt Repayment Plan

You can create a debt repayment plan by consulting with a credit counselor. There are also some non-profit credit counseling agencies, such as the NFCC, that can provide guidance. Your plan defines specific actions you can take to reduce your debts when you have a maxed out credit card. It will typically involve budgeting to remove unnecessary expenses so you can put the saved money towards repaying the debt.

6. Use a Credit Card Hardship Program

Credit card hardship programs are available to those who have maxed out their credit card through situations beyond their control. For example, you may have access to this type of program if you’ve lost your job or experienced a family emergency that resulted in you spending more than you usually would. These programs are offered and negotiated by your credit card issuer. If you’re eligible, your credit issuer may lower your interest rate and waive any fees attached to your credit card for a period of time. However, they may also freeze or close your account depending on the terms of the agreement.

7. Search for Ways To Make Extra Income

Looking for ways to generate extra income is always a good idea. If you have any household items that you no longer use, you should consider selling them to make some extra cash that can go towards your paying down your maxed out credit card. Alternatively, you could set up a side hustle that you work on in your spare time to generate some extra income. Other options include taking on a part-time job and working overtime at your existing job. Consider this strategy a last resort for use if the other strategies in this article don’t apply or aren’t possible for you. Importantly, if you do find ways to make extra income be disciplined and make sure you use it to repay your debt! Try not to use it for non-essential personal spending.

A Maxed Out Credit Card Is Not the End of the World

Receiving the notice that you have a maxed out credit card can be a frightening experience given all the implications. However, the strategies in this article can help you to start repaying the debt,. In doing so you lower your credit utilization ratio and also protect your credit score. The key is to not panic. There are multiple ways to handle such a situation and to immediately start making progress. The key is to start sooner rather than later and to remain disciplined in enacting these strategies.