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Maxing Out Your Credit Card? Here Is What You Can Do!

“A batch of credit cards fattens a wallet before it thins it”.

– Evan Esar

It is true that a credit card is a wonderful plastic sheet that will come to your aid if you use it correctly. Nowadays credit cards are used so widely that it’s hard to imagine life without them. Do you know that in the year 2019 there were more than 79.6 million credit cards in existence in Canada? Quite huge isn’t it? Sometimes a boon can be a curse as well and the same thing is with a credit card. You cannot use it if you end up maxing out the credit card limit. 

But do not worry because it’s not a dead-end there are ways that you can implement to turn the situation in your favor. So let’s get started.

What Happens If You End up Maxing Out Your Credit Card? 

Sometimes when we misinterpret the usage of a credit card it becomes more like a tool for incurring expenses on things that you don’t require. Once you end up maxing out your credit card, it can be a difficult position. The cycle can continue with you buying one credit card, maxing it out, applying for another, maxing that out as well. That not only will create a hole in your pocket but your credit score as well. There are three major consequences that you will have to face if you end up maxing out credit cards.

The Minimum Payment Amount Increases

This is the amount that you will have to pay every month in order to avoid paying an interest rate on the usage of credit cards. If your credit card company applies the minimum payment amount on overall spending without considering when you spend it, it is going to be tough for you as your monthly payment would be on a higher note. The calculation of minimum payment varies from company to company but the possibility cannot be ruled out.

Impact on Credit Score

Credit cards contribute to 30 percent while calculating your credit score. The ideal credit utilization to space for the credit card limit is also 30 percent. It means that if your credit limit is $1000 you can use $700 but should spare a 30 percent limit. If you Max out your credit card spending it is likely to result in a poor credit score and in the future you may find it hard to get a loan when needed.

Difficulty in Transactions 

It is obvious that you would not be able to use your credit card if you max it out. If you have spent money on unnecessary things, it is possible that when you need money the most you won’t be able to use it. Some credit cards allow people to go over the limit but it comes with its own causes like higher interest rates and tough terms.

Read: What is the Average Credit Score in Canada?

Steps You Can Take to Improve the Situation 

Freeze the Usage of Credit Cards 

Well, that’s the best way that you can use to improve maxing out credit card situations. For a period of time do not use a credit card. You can put it away from your reach or just actually freeze it. Also, stop applying for new credit cards as that would make it hard for you to improve your situation.

Live on a Budget

Some people find it hard to cut expenses and get attracted by new things, mostly unnecessary things! The best way for this is to make a budget. Just note down all the necessary expenses that you have to make every month for example utility insurance, food, commute, stationery, etc., and do not spend more than that. Try living on basic needs for some time and save money.

Read: 10 Easy & Realistic Ways to Make 1000 Dollars Fast

Have More Income Sources 

Sometimes the issue is not money outflow but its inflow. It is like you have a limited amount of income but you are spending more than what you have and that’s where the issue lies. Thus it is advisable that you get a part-time job or work from home. With internet availability, you can easily find a job at the comfort of your house and can make money to pay back the debt. 

Save Money

Here, saving money does not only mean saving money from your regular income but also saving money in a way that you cannot use unnecessarily. For example, you can open a Fixed Deposit (FD) or a Systematic Investment Plan (SIP). You can also simply just save money in a bank saving account. The choice is yours but the important thing is to save as much as you can.

Communication is the Key 

Sometimes it’s better to be transparent and communicate with your lender if you are in a tough situation like this. If you know that you won’t be able to make payments, it is better that you let your creditors know about the situation and they might help you in having better terms of payment. You are not the only one that has this kind of situation. They deal with such things on a regular basis and know how to handle it. Though it does not mean that you have to get yourself into such a situation just to take advantage of getting better terms.

How to Pay Off Maxing Out Credit Card Debts? 

Sometimes it’s more about having a strong mental state than having financial stability. For this, you can motivate yourself by paying off small debts first. It would reduce your overall debt and motivate you to pay the credit card bills on time in the future. Below are the three steps that you can take to pay back the debt.

Consolidate Your Debts 

This means that you should combine all your debts including credit card debt and take it off at once. You can do so by getting a personal loan that has a lower interest rate compared to the credit card you are using. This will help you save a bit in the interest rate and improve your situation.

Consumer Proposal Program 

This program is looked after by a licensed insolvency trustee. It provides relief to people having issues in reducing their debt. They will help you make a payment plan and if you stick to that budget you can come out of the situation really soon. 

File for Bankruptcy

Well, I do not recommend this but if you do not have any other option, you can take it as your last chance. This will help you in clearing your debts but not it would also impact your credit score really badly. Such things stay on credit score for a long time and in the future when you want to take a credit card or want to take any kind of credit it is going to be extremely challenging for you.

How to Prevent Higher Credit Card Debts?

As it is said – prevention is better than cure; the same applies to maxing out credit cards scenario.

Evaluate and Monitor the Usage of Credit Cards 

You can make an excel sheet or download an expense tracking application. It would also cater to all your assets, liabilities and monthly expenses. This way you would be able to live on a budget and limit your expenses. 

Slump Your Credit Card Limit 

This is quite a harsh measure but it will work in your favour if you find it difficult to avoid spending money from your credit cards. You can also have a credit card that has a lower credit limit. In that way even if you max out your credit card, the amount would be lower.

Save Money for Emergencies

It is said that you should have 3 to 6 months of your income as your emergency savings. Along with that, you should also save for any medical emergencies if you do not have health insurance. Sometimes a person having a good credit score can also end up maxing out credit cards due to spending money in tough and impulsive times. 

It is better to plan for such things in advance and avoid complications in the future. You can also save and invest your money in mutual funds, ETFs, SIPs, stocks, etc. Now, this may not be as liquid as cash savings, but it would give you good returns if you have done enough research before investing. Please don’t forget to educate yourself before investing in any kind of financial asset.

Read: How To Choose The Right Life Insurance In Canada?


Using a credit card is a tricky business and if you are not a good businessman you might end up losing your business. It is important that you make your decisions on spending money very crucially and avoid unnecessary expenses. Remember that small and steady steps take you a long way. So, implement disciplined financial actions, save money, and you will get more fruits than you expected in the future!

Devanshee Dave

Devanshee is a staff writer at She is a finance enthusiast and has completed her Master’s degree in Mass Communication & Journalism. She has worked as a journalist in a local business newspaper, multiple start-ups as well as finance and economy-related online media houses.

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