5 Alternatives To Maxing Out Your Credit Card

Woman at table stressed about unpaid bills

If you have a tendency to max out your credit card, you may be looking for new ways to make necessary purchases.

The Problem with Maxing Out Your Card

Maxing out your credit card will negatively impact your credit score, as one of the largest factors in determining your credit score is the percentage of available credit you’ve used. If you are using over 30% of your available credit, your credit score may take a hit. If you owe $5,000 on your cards and only have a $5,000 credit limit, you are using 100% of your available credit, which is not good for your score. You must lower this percentage to maximize your credit score.

Most credit card issuers will also charge you a fee if you go over your credit limit, which is a feature you can opt for. However, if you do opt-in for this service, realize it can cause a lot of trouble. The best way to decrease your credit card debt is to spend less, so giving yourself the option of spending more than your credit limit is not a good idea.

There are ways to pay for a transaction without maxing out your card, though. Here are a few alternatives.

1 – Split the Purchase

Instead of making a large purchase on a single card, split it up over several credit cards or payment options. It may be better for you to pay for as much of the purchase as you can with cash or money from your bank account since this is money you will not need to pay back. If you cannot do that, at least disperse the purchase over different cards.

2 – Transfer Balances

You can also transfer a balance to a credit card that has a larger limit and, in a perfect world, a better interest rate. If the balance is high enough, you can free up some of the balance on other cards and have room to spare on the new one. Before transferring a balance, though, remember that many credit card issuers charge a 3% balance transfer fee. You will want to weigh any balance transfer fees before making a decision.

Another way to consolidate your credit card debt is to get a personal loan. The loan will likely have a lower interest rate and could free up your credit cards for emergencies. However, make sure you do not start spending money you don’t have on your credit cards again.

3 – Request a Credit Limit Increase

If you have made payments on your credit card consistently, your issuer may increase your credit limit. This does not mean you should spend the new money, though. It simply means you will have a better debt-to-credit ratio, which will improve your score. Know that most credit card companies will not grant a limit increase request within the first six months of opening your card, so do not ask that early on. You do not want your credit history to be pulled for no reason.

4 – Pay Down Your Balance

If you are near your credit card limit, you can make a large payment to free up some funds. One way to do this is to make more than the minimum monthly payment, as that usually only covers interest. Pay as much as you can every month.

5 – Adjust Your Spending

If you are nearing your credit limit, do not charge anything else unless it is an emergency. Save the money you need before making the purchase. You can still use your credit card, but pay off all purchases right away. In this manner, you will get any rewards your card offers.

If you are worried about missing a sale, ask the store if they offer a layaway program. Then, you can lock in the price with a deposit and pay the balance when you have the money. This is a much better alternative to maxing out your cards.