Maxed out your credit card? 5 consequences it may have

livemint.com:

credit card, you are believed to have maxed out your credit card. And it is not recommended by financial advisors since this is likely to have adverse consequences. For instance, a Delhi-based consultant Ravi Pratap, 31, has a credit card with maximum limit of ₹9 lakh.

Three months ago, he happened to use the entire ₹9 lakh when he was on a foreign holiday with his wife. Now, he wants to raise a personal loan, but the interest rate that the bank is offering is exorbitant. When he asked around to find the reason, he learnt that his credit score has lately suffered significantly as a result of maxing out of credit card.

So, using it to its full capacity can have a slew of consequences. High utilisation ratio: When you max out your credit card, you are using the entirety of your available credit limit. This leads to a high credit utilisation ratio, which is the amount of credit you’re using compared to your total available credit.

A high utilisation ratio can adversely impact your credit score because it suggests you may be overextended financially. Higher interest payments: If you don’t pay off the balance in full by the due date, you’ll start accruing interest on the remaining balance. Credit card interest rates are usually high, so carrying a balance can lead to significant interest charges over time, making it more difficult to pay off the debt.

Late payment of fees: If you’re unable to pay at least the minimum payment by the due date, you will likely incur late payment fees. This can add to your overall debt and financial burden. ALSO READ: These are 5 warning signs of credit score problems.