What to do if you max out your credit card (and can't pay)

Americans are leaning on credit cards more than ever as inflation (while cooling) continues to drive up the prices of necessities and strain household budgets. According to recent data from the Federal Reserve, the total amount of credit card debt now exceeds $1.18 trillion nationwide, and the number of cardholders with maxed-out credit cards has also been climbing. Those types of issues are clear indicators of not just how reliant people have become on their credit cards, but also how difficult it's become to manage credit card debt in today's tough economic landscape.

But maxing out your credit card is a dangerous path to take, especially if you're relying on this type of short-term borrowing to fill in the gaps between your expenses and your income. And, if you hit your credit limit and then realize you can't afford the next payment, you could find yourself in even bigger financial trouble. All it takes is missing a payment (or two) for the late fees to stack up and the penalty APR to kick in, making your debt even more expensive.

Fortunately, there are strategies you can use in these situations to help regain control of your finances. So, what exactly can you do if you've maxed out your card and can't pay it off? That's what we'll examine below.

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What to do if you max out your credit card and can't pay

If your credit card balance has hit or exceeded your credit limit and you aren't sure what to do, here are the steps you may want to take:

Don't ignore your bill; communicate with your credit card issuer instead

It might feel uncomfortable, but one of the first things you should do if you're maxed out and can't pay is contact your credit card issuer. Explain your situation honestly and ask if they offer any hardship programs. Many lenders have internal programs that can temporarily reduce your interest rate, waive late fees or adjust your minimum payment. Access to these programs is not guaranteed, but in many cases, simply asking can lead to some relief, especially if you've been a responsible borrower up until now.

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Stop using the card immediately

Once you've hit your credit limit, using your card again will likely trigger over-limit fees (if your issuer allows it) or declined purchases. Continuing to spend can also make your financial hole deeper, an issue that you want to avoid if at all possible. 

So, if you're relying on that card for daily expenses, stop using it, even if your card issuer allows you to continue making charges. If you can't pay cash for what you need, it may help to look for alternative resources, like assistance programs, freelance work or side gigs, to float you until things stabilize.

Prioritize your payments and cut unnecessary expenses

Even if you can't pay the full balance, making something, even a partial payment, can help you avoid steeper penalties. You should also take a close look at your income and spending and prioritize your most urgent financial obligations. Cut out or reduce non-essential expenses like subscriptions, dining out or shopping, and redirect that money toward your credit card bill whenever possible.

Consider debt relief strategies if the debt is unmanageable

If you've maxed out your card and genuinely don't see a way to catch up on payments, it may be time to consider a more structured debt relief strategy. Here are a few to look into:

• A debt management plan: Offered through credit counseling agencies, a debt management plan can consolidate multiple credit card debts into a single monthly payment with reduced interest rates. You'll work with a credit counselor to build a repayment plan that fits your budget, and creditors often stop collection calls once you're enrolled.
• A debt consolidation loan: If your credit score hasn't dropped too much yet, you may qualify for a debt consolidation loan with a lower interest rate than your credit card. This can help you pay off your maxed-out cards and simplify the repayment process, but only if you can commit to not racking up new card debt afterward.
• Debt settlement: This strategy (which is also referred to as credit card debt forgiveness) involves negotiating with creditors to pay less than you owe, often with the help of a third-party debt relief company. It's generally valuable for people who are already behind on payments and can't reasonably repay the full amount. It will typically impact your credit score and may come with tax implications, though.
• Bankruptcy: As a last resort, filing for Chapter 7 or Chapter 13 bankruptcy can help discharge or reorganize your unsecured debts. It's a serious decision with long-term consequences, but it may be worth considering if you're drowning in debt and have no realistic way to repay it.

The bottom line

Financial setbacks happen, but they don't have to define your future. While maxing out your credit card when you're unable to pay it off may be stressful, the good news is that there are options. And, while finding the right strategy is important, how quickly you take action is equally crucial. Whether that means negotiating with your card issuer, cutting expenses to free up cash, or enrolling in a debt relief program, the sooner you act, the more control you'll have over the outcome.