630 – Maxed Out? The Real Problem Isn't Your Credit Limit

What does it really mean when you max out your credit card?

A maxed-out card may look like a credit problem, but often the real issue is cash flow: you're spending more each month than you have available, and credit is filling the gap. 
 
Take our free online course: Hoyes Michalos Credit Rebuilding Course  

Doug Hoyes and Ted Michalos explain what happens when you hit your credit limit, how maxed-out cards affect your credit utilization and borrowing options, and why simply asking for a higher limit may make the underlying problem worse. 

They discuss: 

• What happens when you max out a credit card 

• How high credit utilization affects your credit 

• The cost of making only minimum payments 

• Why you may have reached your credit limit 

• When a one-time expense is different from an ongoing cash-flow shortfall 

• When increasing your credit limit can make sense, and when it can lead to more debt 

• The risks of moving balances between credit cards 

• How to take inventory of your debts, income and monthly expenses 

• When cutting expenses may not be enough to solve the problem 

• What options are available when you simply can't afford your debt payments 

The key takeaway: hitting your credit limit isn't something to solve automatically by borrowing more. Look at why you reached the limit and whether your total debt is growing. A higher credit limit gives you more room to borrow, but it doesn't give you more income to repay what you owe. 
 
Learn more about licensed debt relief options available in Ontario at https://www.hoyes.com, and the Hoyes Michalos YouTube channel: https://www.youtube.com/@hoyesmichalos 

Time Stamps: 

00:00 Is maxing out your credit card really a credit problem? 
01:16 What happens when you hit your credit limit? 
02:05 When a low credit limit can make sense 
03:26 Is a maxed-out card a warning sign of something else? 
04:50 Why increasing your limit may not solve the problem 
05:06 The problem with making minimum payments 
05:44 How maxed-out cards affect your credit score 
07:21 Can maxing out make it harder to borrow? 
09:22 Why did you reach your credit limit? 
10:15 One-time expense vs. recurring cash-flow problem 
13:34 When credit starts hiding the real problem 
14:07 Should you ask for a higher credit limit? 
16:01 Can transferring debt to another card help? 
16:54 When more available credit becomes dangerous 
18:09 What should you do instead? 
18:56 Start with an inventory of your debts 
20:30 Which debts should you pay first? 
21:44 Calculate what comes in — and where it goes 
23:55 How to find room in your budget 
25:36 What if cutting expenses isn't enough? 
26:26 When a consumer proposal may be an option 
28:23 Final Takeaway: Cash Is King when your debt is growing 

 
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