Signs that your credit card debt is out of control

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Ask a Lender
July 25, 2016 | Updated September 22, 2017


Key Points

Credit card debt

  • Each individual can handle varying levels of credit card debt.
  • Running up your credit card balances lowers your credit score and creates other financial problems.
  • Using payday loans and cash advances to pay credit card bills is a sign that your debt load is too large.
  • Balance transfers may help, but only if you commit to reducing spending. 

It is tough to get a handle on what the average American owes in credit card debt. Different people can handle different amounts of debt. How much is too much? It depends on the person.

A person can carry too much debt, however. The maximum limits on the credit cards are not a free pass to spend up to the limits. People with high balances are seen as a greater risk by banks and financial institutions. If you run up your cards, your credit score could take a deep hit. With a lower credit score, you’ll likely be charged more in interest for mortgages and car loans, and can be denied credit altogether.

If you have maxed out your credit cards, you are also at risk of missing payments, which is one of the fastest ways to destroy your credit rating and draw high-penalty fees. And you’ll likely be left with no credit buffer in case of financial emergencies.

It is no fun to be drowning in debt, and people often live in denial. They will hide their credit card balance from their spouses, or lie about it to friends. Whether an individual has accepted the problem or not, there are some clear signs that the debt is getting out of control.

Signs of a problem

Maxing out one or more credit cards is a sure signal that you are headed for trouble. It is a good idea not to charge up more than 30 percent of the available credit on a card. The card balance vs. the available credit is known as the debt-utilization ratio, and credit rating agencies look carefully at it when assessing your credit score. Many credit counselors believe that it best to keep the ratio close to just 10 percent per card.

Another red flag would be if you are using payday loans and cash advances to catch up each month on your bills and make your minimum payments. Another less obvious warning sign is if you are spending a good bit of your time hunting around for ways to transfer several balances onto a card with a special offer.

Credit advisers offer mixed opinions on doing balance transfers. In one way, it makes a lot of sense to consolidate high-interest balances on a card offering a 0 percent interest rate for transferred balances. On other hand, people often fall into the trap of moving balances onto a card with a special rate and then racking up new charges on the card or cards just cleared of debt.

Unless you change your spending habits, develop a household budget and commit to paying down your debt, you run the risk of putting yourself in a worse position by doing balance transfers.

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