7 Things You Need To Do Now If You’ve Maxed Out Your Credit Card

Here’s a reminder we will all probably need at some point in our lives: Maxing out your credit card can be a stressful experience, but it’s not the end of the world. With the right approach, you can take control of your finances and get things under control. 

GOBankingRates talked to financial experts to find out exactly what you should do when you take your credit to the limit. Here are seven things you need to do now if you’ve maxed out your credit card and need to get your debt under control.

You must stop using the card. Seems basic, but it’s one thing people ignore again and again. 

Brandon Galici, CFP and founder of Galici Financial, emphasized this point: “This might seem obvious, but it’s a critical first step. Consider putting a temporary hold on the card to remove the temptation of using it further.”

By stopping the bleeding, you prevent your debt from growing and give yourself a chance to start addressing the problem.

Thomas J. Brock, CFA, CPA and Annuity.org expert, stressed the importance of reassessing your financial situation.

“Revisit your budget and aggressively adjust your lifestyle, eliminate unnecessary spend and prioritize paying off your debt,” he said.

This step involves taking a hard look at your income and expenses — where can you cut back, even if it’s just temporary. Now is the time to get serious about a seriously tight budget.

Once you’ve freed up some cash, it’s time to create a plan to attack your debt. Galici thinks you should focus on your credit utilization ratio.

“When you max out your card, your credit score takes a hit. This is because credit utilization — credit used divided by total credit available — makes up 30% of your score. Focus on paying down your balance to get your credit utilization below 30%.”

Galici likes these two popular debt payoff strategies:

• Debt Snowball: “Order debts from smallest to largest, make minimum payments on all, but focus extra funds on the smallest debt. This method provides you with quick wins, which can be motivating.”
• Debt Avalanche: “Order debts by highest to lowest interest rate, focusing extra payments on the highest-rate debt first. This approach minimizes the total interest you pay but may take longer to see progress.”

Choose the method that aligns best with your financial situation and personality. The key is to stick to your plan consistently.

Don’t be afraid to reach out to your credit card company.

“Inquire about debt relief options at your disposal, such as a temporary interest rate reduction, a deferred payment plan or a hardship program — if you are stuck with a budget deficit,” Brock said.

Galici agreed, adding that your credit card issuer may be willing to “decrease your interest rate” or “set up a more manageable repayment plan.”

While there’s no guarantee, it’s definitely worth trying. A lower interest rate or more flexible terms will help, so try your hardest to get it.

If you’re juggling multiple debts, consolidation might be your next move.

“Consider transferring your credit card balance to another card with a lower interest rate and/or an interest-free balance transfer period,” Brock said. “Both features can yield much-needed financial relief.”

Galici expanded on this idea: “If you can qualify for a personal loan with a lower interest rate than your credit card(s), consolidating your debt could be beneficial.”

He pointed out that this approach can “reduce your individual credit cards’ utilization ratio, lower your total interest payments and maintain or potentially reduce your monthly minimum debt payments.”

However, Galici cautioned, “Just make sure that you fix any spending issues that you might have. Otherwise, you may end up with rising credit card balances on top of your new loan payment, putting you in a worse financial position.”

Wait, saving money while you’re in debt? The answer is: Yes. It might seem counterintuitive, but it’s important.

“Aim to save three to six months of expenses,” Galici said. “If that seems overwhelming, start by saving $1,000 first. Once you’ve accomplished that, then save up one month of expenses.”

This allows you to build momentum while strengthening your finances. With a healthy emergency fund, you’ll be able to cover unexpected expenses without relying on credit card debt.

Isabel Barrow, director of financial planning at Edelman Financial Engines, thinks it’s important to be honest with yourself about the situation you’re in.

“Begin your journey toward better financial health by acknowledging your situation and what actions led you to this point. This commitment is the first step in addressing your credit card debt.”

Barrow cited EFE’s 2023 Everyday Wealth in America report, which found that 39% of Americans view credit card debt as the biggest threat to their ability to build wealth. This statistic underscores the importance of not just paying off your current debt, but also developing habits to prevent future debt accumulation.

To maintain your commitment, you need to be on top of your money and what’s happening with it.

“Conduct some housekeeping by regularly reviewing and organizing all your financial accounts and documents,” Barrow said. “This can give you a clearer picture of your overall financial health and spending habits, which can help you manage your debt more effectively.”

And if all of this seems overwhelming — don’t worry, there’s help.

“If you’re reassessing your financial goals, it might be beneficial to meet with a financial advisor,” Barrow said. “They can help you discover efficient ways to improve your financial health in the long-term, including strategies to manage and pay off your credit card debt.”