Maxed Out Credit Card? Here's What Happens

If you end up maxing out your credit card, there are a few things you should know that are gonna happen, but it's not gonna be the end of the world because you can always dig yourself out. I just wanna tell you what does happen when you max out your card. Now, the first thing I want you to understand, and I don't quite know why it works this way, but your credit card limit is more of a guideline rather than a set rule because a lot of credit cards out there, if you spend over your credit card limit, you can actually do that up to a certain amount of money before your credit card declines. And how much money that is, I have no idea because it changes based on all the different customers out there, but I have seen it happen in real life where you can go over your max limit before your credit card declines. So even though in some cases you can still use your credit card just a little bit past the limit, this doesn't mean that it's a good idea to do that because eventually your card is gonna decline. So don't max out your credit card just for this one reason alone because eventually the card is gonna decline. And I also want you to know that if you do max out the credit card, the APR rate that your credit card charges is technically a variable rate. And inside the terms, it always says that it can vary based on your credit worthiness. And so I don't really know if your APR is gonna go up if you max out the credit card, but based on their terms and under their discretion, you technically could have a higher APR rate just because you've maxed out your credit card because technically it is affecting your credit score negatively and that's what I'm gonna go over next. So basically there's a huge chunk of your credit score that's affected by how much credit you're using versus how much credit you have available. And so if you're spending a lot on your credit card, that can affect your credit score negatively because of the way that all this stuff works. Because if you end up maxing out your credit card, you are gonna affect your credit score in at least three different areas because we're talking credit usage, this is gonna be 20% of your score, available credit, this is just 3%, and then you've got another 11% in what's called total balances. So all of these actually have to do with how much you're spending versus what your limits are and obviously using a credit card affects all of these. Now what you need to understand is that all of those categories are affected by what's called your credit utilization score. And this is very easy to understand because all it is is basically how much you're spending on the credit card versus what your limit is. So if your credit card's limit is $10,000 and you use up $9,000 of the limit, then your utilization score is gonna be 90% and this is gonna affect your credit score negatively because they want your utilization score to be below 30%. So basically anything above 30% is gonna hurt your credit score and anything below 30% is going to help your credit score. So keep low balances on your card and you're gonna have a good utilization score. But obviously if you max out your credit card, then you really are gonna affect your utilization score in a bad way.