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It’s the cardinal rule of credit card use: “Whatever you do, don’t max out your credit card.” It’s good advice, but there are always exceptions to rules. Remember, maxing out your credit card is risky if you won’t be able to pay down the balance fairly quickly. 

Maxing Out Your Card May Affect Your Credit Score

The effect that maxing out your card will have on your credit depends on how much debt you already have. It may lower your credit score and raise your minimum payment on the card. If maxing out a card will cause your credit utilization to exceed the recommended 35-40% you could see a dip in your score if you wait more than 30 days to pay down the balance. 

For example, if you have a $15,000 credit card limit spread out on 3 cards, spending more than $6,000 could cause your score to drop. 

We’ve made a list of 6 times maxing out your credit limit may be OK.

1. Taking Advantage of a 0% Introductory Offer

If you are using a credit card with 0% introductory offer for a special purchase or  to consolidate your debt  you may decide to max out the balance on the new card. This strategy works as long as you plan to pay off the card before the introductory period is over. Doing this allows you to pay back the debt within the introductory window without accruing interest. 

2. Waiting on Unemployment Insurance

If you have been recently unemployed and are eligible for unemployment insurance, you may have to wait a few weeks to get your insurance payment. In the meantime, it’s OK to use your credit card to cover expenses. Pay off the credit card as soon as you get your unemployment payments. 

3. Waiting on Payment From a Client

If you are a freelancer or independent contractor, you may occasionally have to use a credit card to cover expenses until invoices are paid by your clients. This strategy can help you pay bills on time and avoid late fees. This works best if you feel confident you’ll be able to pay down the  balance off as soon as you receive payment. 

4. Taking Advantage of a Rewards Program

Some credit cards have valuable rewards programs that are based on how much you spend on your limit. For example, you may want to earn miles to put toward an upcoming trip. To do so, you might decide to  spend the limit on your credit line to maximize your reward and pay it down right away.

5. Avoiding Foreign Transaction Fees While Traveling

When you are traveling abroad or experiencing an emergency in a foreign country, you may decide to max out a card to take advantage of low or no foreign transaction fees and pay off the balance when you finish your trip. 

If you plan to use credit while traveling abroad make sure you read up on tips to stay safe and avoid fraud or fees. 

6. Handling a Serious Emergency

If you have a medical expense or need to make an emergency home or car repair, maxing out your card may be your only option. Ideally you would have an emergency fund for this, but if you do not, using your credit card is a short term solution. 

Learn more about  how to save for an emergency fund

Pay Down the Balance as Soon as Possible

These exceptions work best if you know you’ll be able to pay down the balance in a timely fashion. It’s never a good idea to max out a card or use more credit than you can afford to pay back. Overextending yourself can lead to costly late fees and serious damage to your credit if you can’t make your payments. 

If you have debt that you can’t afford or have already maxed out one or more of your credit cards, consider these tips for advice on what to do when you max out your credit card.

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