Wednesday, June 11, 2014

Maxxed out

Sarah over at Digging Out of Debt blogged the other day about her outrage that the credit card company raised her limit without notifying her first.  She didn't want it, but there it was.  On the flip side, she stated that it would help her debt to income ratio.  Of course this is a way of the company trying to lure someone in to using the card you have even more "spending power." 

Some people are under the impression that when you have alot of credit card are "maxxed out."  There are 2 parts to this: 1)  "Maxxed out" on what you can pay per month (and obviously if you are carrying a balance you aren't paying it in full), and 2) "Maxxed out" to the limit of the card(s) where even if you wanted to keep using couldn't.

We may have almost $9000 in CC debt (and if you count the retirement loan which largely consolidated our higher interest CC debt, that number rises to 27k), but in regards to definition #2.... being maxxed out on the limit....we aren't even CLOSE.

Yes, our lovely CCs have "entrusted" us with ridiculously high limits.  All in an attempt to make us spend more.  Yes....we did fall for this....and we used our cards unwisely.  And yes we are paying the price.  But if we really wanted to get ourselves in trouble. ...we have:

  • G-man's Visa (pre-marriage) - $24,500
  • Mysti's Mastercard (pre-marriage) - $18,500
  • Discover (post marriage) - $16,100
  • Chase (post marriage) - $14,000
  • Mysti's Credit Union Mastercard (pre-marriage) - $3,500
  • Lowe's (post marriage) - $2500 (I think)
  • Kohl's (post marriage) - $1000
  • JCPenney(G-man, pre marriage) - $500

That is $80,600 of credit that we have available to us.  That is insane.  The only card that has a balance on it is the Discover card.  We are utilizing approximately 68% of that card, so when we look at our credit score, we get "dinged" for high utilization.  But if you look at everything as a whole, we are utilizing about 11% of our available credit.  (That number changes to 34% if you count in the money that was consolidated in the retirement loan.

By no means is this GOOD.  We had a plan to get rid of the CC debt at a MUCH lower rate using the retirement loan (the highest CC rate was 15.99%; the retirement loan is 1.85%, and yes, we realize that is at the expense of interest we would have earned if we didn't touch it, but we would have probably PAID more interest).  We botched that plan by running up the Discover card over the past 2 years. But we are working to fix that, and hopefully G-man's car will be paid off in about 8-9 months, and then we can fix this.

But maxxed, we are not maxxed out by definition #2.   We have lots more credit available if we wanted to hang ourselves on.  At the current debt level, it would become increasingly more difficult to handle a monthly payment more than what we have now, so by definition #1....yeah, we are maxxed out.

If you have consumer debt, do you consider yourself maxxed out????


  1. We used to have some department store cards - Lowe's being one - but they all closed our accounts after a year or so of us not using them and not carrying a balance. Apparently the little guys don't play the game the same way the big guns do. .. But to your question. Yep, I consider us maxxed out and I will until we are out of the credit card game. As long as the albatross is around our neck ...

    1. We use our store cards for one small purchase a year just to keep them active. I don't care about JCP. Lowes was used to purchase the stove that we replaced last summer (and paid off immediately from EF), but we KNOW that appliances will die, and we are hoping to replace the fence and resurface deck in the coming years (maybe 2?). So I do want to keep that active. Kohl's....used for the coupons and paid off when I get home.

      For me personally, I have less reaction to the CC debt itself...I tend to look at the total number more than the individual pieces. But like I said....the amount we pay monthly is about as much as we can do,

    2. I hear ya. We went the other direction because we can't trust ourselves :) If the availability is there, we are more likely to use it for an "emergency" instead of figuring out how to squeeze out the dollars to pay. That happened when our furnace went out this winter. Woke up one day not knowing we would be shelling out $800 that day. I was momentarily panicked, but went to the checkbook instead of a card - this was SO not what we have always done. For us it's a slippery slope - pull out that card once and it's easy to pull it out a second time. Plus, we're not as good as you are about paying it all off immediately. Our intentions might be good, but we get stung every time. Sigh. Did I mention I hate these things???

    3. We tend to be like that with our "major" cards, but are working hard to not do that! When the stove died, we had it in the EF (as much as I hated using it!). We got the Lowe's card so we could get a discount, so we used the card as a tool. We bought the stove over a weekend. On Monday, I went to the credit union and withdrew the money.....drove to the bank and deposited the money.....and paid the bill. (In hindsight, I should have just gone back to Lowe's and paid the bill there!!)

      We are all just fighting our own fight....everyone has there own battles, which may not be the same. You are doing FABULOUS!

  2. I thought being maxed out simply meant that you're at your credit limit on a certain card. So if you have a 4k limit on CC1, and a balance of 3.9k, then you were pretty close to being maxed out. I don't understand #1's definition.

    But indeed, that's a very high limit. Right now I am close to 12k amongst all cards, even if I don't use all of it. I don't think much of it one way or another, because I don't keep track of limits; I am still using the cards as debit (with money in the bank to back it up), but if I ever find myself losing footing, I think reducing my limits would be something to consider.

    1. There is a minimum payment on the cards....if you can't afford for that minimum payment to get any you consider yourself "maxxed out"? If the minimum is $ you have room in your budget for it to get to $75....or will anything over $50 cause chaos?

      We never asked for THIS much Sarah, the cards just upped and upped. It doesn't bother me that we have this much, but if we weren't paying would be easy to create a situation that was beyond fixing.

    2. Ah. No, I wouldn't consider not making min payments as maxed out, but I see now where you're coming from.

  3. Banks might not lend you money if you have too much available credit. They look at the amount of debt you could get into and can turn you down for loans. Here in Canada anyways. I prefer to have very low amounts of credit. Although we do have almost 30k available credit on our credit line. We only have a Sears card(almost paid off and will never be used again-a different rant altogether) and a Visa through our bank. I get credit card offers in the mail and throw them all out. We would not have a line of credit or a Visa had my husband not opened them when we were dating.
    To answer your question, no we are not anywhere near maxed out. Even still, I want to pay off the debt and be done with credit.

    1. I am not super knowledgable on this subject, but from personal experience....even with all of this credit, we only had one time back in 2009 when we had a hard time getting approved for a loan. At that time we had balances on many cards and our debt to income ratio was considerably different than it is now. Since then, we have purchased 2 cars and refinanced the house, and didn't have a problem.

      I look forward to the day when all of this is behind us. Chugga chugga....

  4. I have available credit, but I tell myself I am maxed out b/c the payments are difficult. Like you stated, I made my choices and have to learn from them. I have 2 consumer CCs in my name, 1 is near the $3k limit, but 1 is almost paid off (17% left to pay). I have a Care Credit Card for medical expenses that is sitting at 60% used. I have a bank line of credit that's 70% used. And lastly, I am an authorized user on my father's CC for emergencies.. gotta be careful I know, so I watch the balance. He recently paid it off, so I have a lot of available "money" there. If the balance ever goes up again in that it's hurting my credit, I can remove my name. Let's not even discuss student & car loan(s), lol.

  5. I've never heard explanation no. 1 - for me maxed out always means I've spent up to the limit. It gets tricky when the minimum payment is less than the interest you might incur on the balance and how sad to admit I've been in that situation (i.e. using easy numbers as an example, 1,000 limit, 990 used, minimum payment 30 made but interest next time round will be 45 and that's going to put you over the limit). There were a few months when I was scraping money together desperately just to make a payment enough over the minimum that that wouldn't happen.
    Limits being raised without asking (and considering the available credit to be actual money) is what got me into debt for sure. I have a post in the work about it, so it's interesting that the topic has come up recently on a couple of blogs.

  6. It's also a good credit card movie!