Maybe you thought that your financial shortfall would be temporary. Perhaps it was. What many people find is that being maxed out presents a new list of challenges.
We evaluated the situations of hundreds of clients to list the most common challenges being faced once a family finds themselves maxed out. These are the results of our review.
- Over-the-Limit Fees–These hefty penalties can cost you a fortune when you can least afford it. Most over-the-limit fees are anywhere from $25 to $39. If you have five credit cards that are maxed out, this is likely costing you an extra $150 a month. Imagine what you could do with $150 a month in spending money. You could probably pay a couple of bills with that kind of extra money.
- Higher Interest Rates–Your interest rates will typically increase, often as high as the default rate listed in your ever-changing card holder agreement. This can cost you thousands of dollars a year in additional finance charges. That’s on par with many car payments.
- Universal Default–Any card not maxed out will likely still incur a higher interest rate. That credit card issuer can, according to your card holder agreement, increase the interest rate if you show other credit concerns on your credit report. Doesn’t that explain why your creditors check your credit report almost every month?
- Much Higher Minimum Payments–Your minimum payments can be double what others with similar debt balances have to pay. Your minimum payments are calculated by including all of your (elevated) finance charges for the month, any late fee, over-the-limit fee and a portion of your balance greater than or equal to 1 percent.
- No Available Credit–You can no longer borrow against your credit cards for emergencies such as car or home repairs or even medical problems. You may even have a problem buying food or gasoline.
- Bad Credit–Your credit score will plummet when you are maxed out. Even if you stay just below the limit, other creditors know you are a major default risk. If any lender approves a loan request, it will carry one of the highest interest rates allowed by law. This eliminates most consolidation options.
If you are maxed out, then you may still find consolidation possible by enrolling in a debt management plan. These plans are sponsored by many of your major credit card issuers and can help you reduce interest rates, eliminate late and over-the-limit fees and even reduce your payments on most major credit accounts. However, you must receive counseling from a qualified credit counselor and agree to give up use of the cards. If you are maxed out, then you are already unable to use your credit cards. You should seek help today.
