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You'll Never Guess How Many Credit Card Users Have Maxed Out Their Credit Cards

by Christy Bieber | Aug. 1, 2019

The Ascent is reader-supported: we may earn a commission from offers on this page. It’s how we make money. But our editorial integrity ensures our experts’ opinions aren’t influenced by compensation.

Pastel-colored credit cards on a pink background

Image source: Getty Images

According to a recent study conducted by The Ascent, more than half of Americans reported they have maxed out their credit cards. In fact, a total of 52% of Americans reported having hit their card limit, including 50.3% of millennials, 58.8% of Gen Xers, and 39.3% of baby boomers. While maxed out cards are a problem that spans all generations, Gen Xers were the most likely to report reaching their credit limit.

Maxing out credit means spending up to the card's credit limit -- so if your card has $5,000 in available credit, you'd run up $5,000 worth of charges. This could happen all at once if you make a very expensive purchase. Or it could happen over time if you regularly use the card and don't pay off all you owe, causing the balance to compound and grow.

Maxing out cards is common. But it's also bad news and should be avoided at all costs.

Why maxing out your credit cards isn't a good idea

Maxing out your credit cards is a bad idea for obvious reasons: If you charge a fortune on your cards, chances are good you won't be able to pay off the total balance when the bill comes. And if you can't pay off your balance in full, you're going to pay interest.

Interest adds to your expenses and makes debt payoff harder. The more of your money going to interest, the less you have for other things. The interest rate on credit cards tends to be higher than that on other types of debt like car and personal loans. When you run up a big balance at a high interest rate, it can be hard to become debt-free again.

Maxing out your cards is also a bad plan because you could hurt your credit score. One of the most important factors that determines your credit score is your credit utilization ratio. This is calculated by dividing the credit you've used by the credit available. If you've charged $3,000 on a card with a $10,000 limit, you have a 30% credit utilization ratio.

If your credit utilization ratio exceeds 30%, your credit score will be lower because of it. Maxing out your cards is particularly damaging to your credit, as it can make future lenders nervous that you can't control your spending. This could mean you won't be approved for loans as easily. And if you do get approved, you could end up being charged a higher interest rate.

What can you do if you've maxed out your credit cards?

If you've maxed out your cards, you should make a plan to pay off what you owe ASAP. Ideally, you can make extra payments to pay down the balance more quickly.

Because you're probably paying a lot of interest with maxed out cards, you may also want to look into a balance transfer. This would involve finding a credit card offering a 0% promotional APR on transferred balances.

You could move some or all of your debt to the new card to avoid paying interest during the promotional period. Since more of your money would go toward principal, it would be easier to become debt-free.

Just be sure you're committed to making payments and not charging up your other cards once you free up your credit. Remember that if you don't pay off the balance due before the promotional rate expires, your interest rate could go up.

Asking for a credit line increase could also help to reduce the damage of a maxed out card. After all, if your credit line is bigger, you wouldn't be maxed out anymore. The Ascent found 33% of Americans were planning to ask for a credit limit increase next year, so this may be a common strategy. But again, you need to be sure not to max out the new limit -- and there's no guarantee your card issuer will increase your credit line.

Maxing out your cards is bad news

If you're among the majority of Americans who have maxed out your credit cards, it's easy to see why this is a bad idea and why you shouldn't do it again.

If your cards are still maxed out, start working on getting that debt paid down ASAP to improve your credit score and reduce the interest you're paying. It takes effort, but your financial life will be better once you're no longer at your credit card limit.

Our credit card expert uses the card we reveal below, and it could earn you $1,148 (seriously)

As long as you pay them off each month, credit cards are a no-brainer for savvy Americans. They protect against fraud far better than debit cards, help raise your credit score, and can put hundreds (or thousands!) of dollars in rewards back in your pocket each year.

But with so many cards out there, you need to choose wisely. This top-rated card offers the ability to pay 0% interest on purchases into 2022, has some of the most generous cash back rewards we’ve ever seen (up to 5%!), and somehow still sports a $0 annual fee.

That’s why our expert – who has reviewed hundreds of cards – signed up for this one personally. Click here to get free access to our expert’s top pick.

About the Author

Christy Bieber
Christy Bieber icon-button-linkedin-2x

Christy Bieber is a personal finance and legal writer with more than a decade of experience. Her work has been featured on major outlets including MSN Money, CNBC, and USA Today.

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The Ascent is reader-supported: we may earn a commission from offers on this page. It’s how we make money. But our editorial integrity ensures our experts’ opinions aren’t influenced by compensation.

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