Reasons Not to Max-Out Your Credit Card Limit
Reasons Not to Max-Out Your Credit Card Limit

Credit limits, whether it may be with the Bank of Commerce Mastercard Platinum card or an American Express card, is definitely not a good thing. Aside from the fact that you will be getting a lot of additional penalties, negative things can also affect your credit account.

Even if you have a high credit limit, it is still a bad idea to use it and max it out as this can definitely have a negative effect on you, making you have unnecessary debts and additional bills on your account. To learn more about this, here are some of the reasons as to why maxing out your credit card limit is not a good idea.


Your credit score will immensely drop

One of the things that can happen when you max out your credit card is that your credit score will drop. This is because 30% of your credit score is purely based on how much are you using in your available credit. Simply put, the higher your credit utilization, the more you hurt your credit score.

This is why it is highly discouraged that you max out your credit card limit. However, if you have maxed out your credit score and all your credit cards, the best step that you can do is to stop creating more debt and start paying all your balances. This way, you will be able to recover from this situation.


Present and future lenders will not like it

Maxed out credit card limits and credit cards are definitely a big no to the eyes of lenders. So in the event that you have come to this situation, expect that you your mortgage or car loan will be denied. Always keep in mind that the bank will certainly check your account just to see how much is still available in your credit. When your credit card have high balances, the bank only sees it as a sign that you already have more debt that you can handle.


Going over your credit limit is not a good idea

This is a little tricky because even if you keep your balance below your credit limit, you can still end up going over your credit limit once your finance charges are already applied to your account. With this in mind, going over your credit card limit will also entail additional penalties, which in turn, will even further put you over your limit. This is why paying your balances regularly and avoiding debts as much as possible is a must.


You will have a hard time repaying the balance

Paying for the accumulated balance that you have for a month is already hard to pay. Imagine adding up another chunk of balance for you to pay just because you have gone over your credit card limit? Paying only the minimum payment every month will surely take you years until you finish paying it. For this reason, make sure that you pay your credit card bills in advance or on time and cut down any unnecessary transactions and purchases to help you minimize the bill that you have to pay.


You will risk on getting a penalty rate

Credit card companies and banks have all the right to raise your credit card interest rate, most especially when you exceed your credit card limit. Always keep in mind that the penalty rate is the highest interest that your credit company can charge you. When your credit card issuer increases your interest rate, you will have no choice but to end up in making large monthly payments.


In summary

With these things in mind, it is best that you always keep your credit card balance as low as possible. For one, you will be able to pay it off each month without any hassle. In addition, you will prevent any negative impact on your credit score and account. Make it a habit to always check your credit limit first before making any credit card transaction or purchase.


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