You Might Not Realize What Happens When You Max Out Your Credit Card

Image source: Getty Images

Uh-oh -- it happened. You bought a lot of stuff at once -- thanks, Prime Day -- and now your credit card limit is nearly maxed out (let's say $2,985, on a limit of $3,000). Your next paycheck won't arrive for another two weeks. Is it OK to leave your credit card maxed out? What happens if you don't pay it off immediately?

While maxing out a credit card isn't punishable in itself (after all, your credit card company gave you that upper limit), it can lead to some nasty consequences for your credit and financial life. If you're close to maxing out a card, here are some repercussions that might come your way.

Your credit score might take a hit

Maxing out your credit card will run up your credit utilization ratio. This ratio measures how much credit you're using vs. how much you have in credit limits. In general, the lower your credit utilization ratio, the better your credit score.

Let's say you charged $2,985 on a card that has a $3,000 credit limit. For this particular card, your credit utilization would be almost 100%. You don't need to be a personal finance expert to realize this could have a negative impact on your credit score.

Most people, however, have more than one credit card. This will increase your total credit limit and, therefore, soften the impact of a single maxed-out card. For instance, if you had five cash back credit cards with $45,000 in credit limits, maxing out a $3,000 credit card would result in a 15% credit utilization ratio.

Minimum payment amounts could increase

The minimum payment is the minimum amount that you're required to pay on your credit card to avoid penalties and late fees. Typically, your credit card company will calculate your minimum payment from your monthly balance. So if you've maxed out the credit card, you could see a much higher minimum payment for that billing cycle.

Of course, paying only the minimum is an expensive way to use credit cards. In some cases, the minimum payment could cover mostly interest charges without paying down your principal.

For example, if the minimum on a credit card with a $3,000 balance is $120, it would take you 125 months to pay off your charge, assuming the card has a 21% APR. That's more than 10 years. In that time, you'd also accumulate more than $2,160 in interest charges, which is more than half the original charge.

Then again, if money is tight, paying the minimum will at least help you avoid penalties and late fees. At the very least, pay the minimum, but if you can, pay more to avoid racking up debt.

Your card could be declined

Finally, a maxed-out credit card could render the card useless. Since credit cards operate on a revolving line of credit, you'll need to pay down your balance to free up more space. If you don't have enough credit to cover a transaction, it could get denied.

Most credit cards, however, will let you go over your credit limit, so long as you've opted in for over-the-limit protection. This protection will let you exceed your credit limits for a fee. You can be charged one such fee per billing cycle and one additional fee over the next two cycles.

Although this can prevent an embarrassing situation in which your credit card is declined, it can also become an expensive way to continue using it.

All told, if you've maxed out a credit card, don't fret. You can reverse the consequences by paying down your balance. If the balance is higher than what you can reasonably afford right now, consider transferring it to a balance transfer credit card .

These cards typically come with an introductory 0% interest period that can allow you to pay down your principal without incurring more interest charges. It can help you get your balance back to zero (or close to it), thereby improving your credit score and getting you out of credit card debt.

We're firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers. The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.The Motley Fool has a disclosure policy .