In today’s challenging economic landscape, many Americans are facing financial pressures on multiple fronts. For starters, persistent (but cooling) inflation has driven up the cost of consumer goods and the high interest rates meant to temper it have made borrowing more expensive. These hurdles have placed significant strain on the average person’s budget, leading many to become reliant on their credit cards to fill in the gaps between their income and expenses.

Recent data paints a stark picture of this trend, with the total credit card debt nationwide now sitting at a record high of $1.14 trillion. As more people have turned to their credit cards to cover essential expenses like food and fuel, there has also been a notable increase in maxed-out credit card accounts, with 20% of credit card accounts now at their credit limits.

But while many cardholders have no choice but to use their credit cards right now, it’s important to understand that there are repercussions for maxing out your credit cards and exceeding your spending limits. Below, we’ll detail what happens when you cross that threshold — and what options you have if you find yourself in this situation.

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What happens if you exceed your credit card limit?

Exceeding your credit card limit can trigger a series of consequences, including:

Over-the-limit fees and higher interest rates

Many credit card issuers charge a fee when you exceed your credit limit, typically ranging from $25 to $40 per instance. In some cases, your card issuer may also increase your interest rate as a penalty for spending more than your limit. This double whammy of fees and higher rates can quickly compound your credit card debt, making it even more challenging to bring your balance back under control.

Learn how to take control of your growing credit card debt today.

Declined transactions and reduced credit limit

Once you’ve exceeded your limit, your card may be declined for further purchases until you pay down what you owe. This can be particularly problematic if you rely on your credit card for essential expenses. Plus, your card issuer might lower your credit limit as a risk-mitigation measure, further restricting your purchasing power and potentially impacting your credit utilization ratio.

Significant credit score impact

Exceeding your credit limit can have a substantial negative effect on your credit score, as it increases your credit utilization ratio, which accounts for about 30% of your FICO score. A high utilization ratio suggests to lenders that you’re overextended financially, potentially making you a higher-risk borrower. This can lead to a significant drop in your credit score, impacting your ability to secure loans or favorable interest rates in the future.

Loss of rewards and account privileges

Some card issuers may suspend or revoke rewards programs for accounts that exceed their spending limits. This means you could lose out on cashback, points or miles you’ve accumulated. You might also lose certain account privileges, such as balance transfer offers or the ability to request credit limit increases.

Increased scrutiny and potential account closure

When you exceed your spending limit, your account may be flagged for closer monitoring, potentially leading to more frequent account reviews. In extreme cases, repeatedly exceeding your limit might prompt the issuer to close your account altogether. An involuntary account closure can further damage your credit score and leave you without a crucial borrowing tool.

Long-term consequences for future credit

A history of exceeding credit limits can make it harder to qualify for loans or new credit cards in the future. Lenders view this behavior as a red flag, indicating that you might struggle to manage credit responsibly. This can result in loan denials, higher interest rates on approved credit or lower credit limits on new accounts.

What to do if your credit card debt is out of control

If you find yourself struggling with overwhelming amounts of credit card debt, there are several debt relief options available:

• Debt consolidation: Consolidating your debt involves taking out a new loan to pay off multiple credit card debts. The goal is to secure a lower interest rate, making it easier to pay off what you owe.
• Balance transfer: Similar to debt consolidation, a balance transfer involves transferring high-interest credit card balances to a new card with a lower or 0% introductory APR, temporarily reducing the cost of the interest charges.
• Debt management plan: With a debt management plan, the goal is to create a structured repayment plan that may include negotiating lower interest rates with your creditors.
• Debt forgiveness: When you pursue debt forgiveness, the debt relief company you work with negotiates lump sum payments with your creditors that are less than the full amount owed. 
• Credit card hardship programs: Many issuers offer temporary hardship programs that can lower interest rates or waive fees if you’re experiencing financial difficulties.

The bottom line

While the current economic climate has made credit card reliance a necessity for many, it’s important to understand the risks of exceeding your credit limits. If you find yourself approaching or exceeding your limit, take proactive steps to address the situation, whether it’s cutting expenses, seeking additional income sources or exploring your debt relief options. Ultimately, taking action sooner rather than later can help mitigate the long-term financial impacts of credit card debt.