Cash poor and budget challenged consumers often ask whether they are able to squeeze more money from their credit cards (even when the card is maxed out). It’s a sad commentary on our financial times that this question is asked as frequently as it is.
What is a Maxed Out Credit Card?
When you are issued a new credit card you have a spending limit on that credit account. Though there are lenders who issue cards with no spending limit, it’s not surprising those accounts are approved only for people who have income far above the average worker’s salary.
If you use your credit card as recommended by financial experts, you will never charge more than fifty percent of the total spending limit to your credit account.
This seems to be a silly suggestion. The lender said you can spend up to $3000 so why would experts say you should only spend $1500 of that amount?
Understand That Credit Cars are Not Loans
Credit cards are not meant to be “loans” though many of us use them in that way. With a credit card you can buy an item on sale or buy things you need today that you can’t afford to pay for until next week or next month.
This provides an incredible convenience for consumers. It allows you to spread your spending over a longer period of time for large purchases and to take advantage of the leverage of your credit line for impulse purchases or unanticipated bargains when you find them.
If you have a $3000 spending limit on your card, your lender may see you have a $500 balance of debt one month and $1200 in debt the next month.
The amount fluctuates both up and down and that is reassuring to the lender and credit rating agencies that you are using your credit and paying off credit as well.
Poor Knowledge about Handling Finances?
If you are not good at handling finances you may see your new credit card and the spending limit attached as an invitation to go on a shopping spree.
When your debt on a credit account rises each month and you are paying only the minimum amount due on the monthly statement, you are headed for trouble.
This is dangerous territory. It will hurt your credit rating to be at the top of your spending limit. If your credit line is $3000 your card is “maxed out” when you reach $3000 in debt.
From the viewpoint of a rating agency, you are in financial difficulty and become high risk for additional credit cards or loans. Your credit rating is lowered until your debt is reduced.
Purchases, Maybe – Cash, Maybe Not
The new credit lending regulations that went into effect in the U.S. in early 2010 allow consumers to opt out of being allowed to go over the spending limit for their credit cards.
Years ago, if you had only $17 remaining of your spending limit and you tried to buy a $20 item, the charge would have been declined. Instead, the store clerk would have told you to call your credit card lender.
Back then, the clerk often placed the call for you right there at the checkout desk and you could ask the lender to approve the charge. If your payments were in good standing, the purchase would be approved.
Allowing Credit Limit Overdraft
As credit card use exploded, lenders began choosing to allow consumers to go over their credit limit as long as the account was in good standing.
This might seem like a consumer friendly policy but what was happening was a boon of fees to lending institutions.
If you went $5 over your spending limits with a purchase the sale would go through seamlessly. However, your next billing statement would reflect up to a $39 fee for the privilege of exceeding your credit line by $5.
This fee was assessed for each purchase made over the credit line. Not surprisingly, consumer complaints began to be heard by both lenders and legislators.
The people who were at the top of the spending limit had that amount of debt because they were in trouble financially or totally lacking money management skills. These were the people who least could afford such predatory fees.
If you have chosen not to be allowed to exceed your credit line, you cannot get money off your credit card if it’s maxed out.
The transaction will be declined. If you have not opted to have your credit limit enforced by the lender the ability to get a cash advance is determined by the policies of the particular lender.
If you are asking whether you can get more cash from you “maxed out” card, you may be in serious financial jeopardy. In an emergency situation you may be able to call your lender and obtain the cash you need through a temporary increase in your credit line.
However, if you have taken the option of not being allowed to go over limit or if you have a less than good payment record with the lending institution, you will not be able to get money off your credit card if it’s maxed out.