One of the worst parts about credit card debt is that, if you’re not careful, it can creep up on you: You start out with the best intentions. You plan to pay off your credit card in full every month. You plan to treat your credit card like cash, and to use it responsibly, as a tool to help you build a solid credit history.
It’s so easy to use (and misuse!) credit cards, though. Before you know it, you’re overspending and carrying a balance from month to month, and you’re using your card to cover gaps in your budget and pay for not-so-urgent “emergency” purchases.
And then one day, you realize that your card is completely maxed out. This can be a rude awakening, especially if you haven’t been paying much attention to your growing balance.
If you have a maxed-out credit card, don’t panic! It’s a less-than-ideal situation, but there are steps you can take to deal with your debt problem without making your situation – or your credit score – even worse:
- Admit you have a spending problem. Unless it’s the result of a truly dire situation — like emergency hospital bills or major car/home repairs that can’t be postponed – your maxed-out credit card is a major red flag. The first thing you should do is take a long, hard look at your spending habits. Get out your credit card statement or log onto your account and check out your purchase history. How did your card get maxed out? What are you spending money on? When did your balance start to get out of control? The answers to these questions could help you pinpoint your weaknesses and create a plan to address them.
- Tweak Your Budget to Maximize Your Payments. If your credit card is maxed out, your number one priority should be paying it off as soon as possible. And that means figuring out the maximum amount you can pay each month. Figure out how much you need for necessities like rent and any other fixed monthly expenses. Then, review your spending: Are there any areas you can trim down? Take a look at your monthly bills: Could you switch to a cheaper cell phone plan or cut out cable TV? Anything you can save should go toward your maxed-out credit card.
- Ask for a lower interest rate. There’s a good chance that if you’ve got a maxed-out credit card, this may not be an option. But it never hurts to ask your credit card company for a lower rate. The worst they can say is no. And if you have a history of making payments on time and you haven’t maxed out your credit card previously, there’s a chance that you’ll get a break.
- Apply for a balance transfer (maybe). Again, depending on your overall credit history, you may not be eligible for a balance transfer. But if your credit card company isn’t willing to lower your interest rate, it might be worth a try. Most balance transfers offer super-low introductory rates for a set amount of time (usually six months or a year), which can help you take a bigger bite out of your balance.
A word of warning, though: If you do get a balance transfer, don’t use it as an excuse to run up a new balance on the card you maxed out. That’s how you got into trouble in the first place.
And speaking of running up a new balance . . .
- Stop using your card. Whether you opt for a balance transfer or just decide to tighten your belt and double down on your credit card payments for a while, you’ll find that in a month or two you’ll have some wiggle room on that formerly maxed out credit card. Don’t use that wiggle room as a way to create more debt. If you don’t think you can resist the temptation to spend, consider cutting up or shredding your card.
A maxed-out credit card isn’t the best thing for your credit or your budget – but it doesn’t have to be the end of the world, either. If you commit to paying as much as you can, and, more importantly, to changing your spending and credit habits, you’ll bounce back.
And remember, if you need information or advice about finances, savings, or how to pay off your maxed-out credit card, you can contact the Debt Guru team today for a free debt consultation.