Your credit limit isn’t a guideline or a suggestion. It’s an absolute amount that you shouldn’t exceed. In fact, you shouldn’t be anywhere close to that amount.
But what if you are bumping up against your credit limit? This is a state of affairs that’s commonly called having a “maxed out credit card.”
When Is a Credit Card Maxed Out?
A maxed out credit card is when you’ve reached – or even tried to exceed – your credit limit. An example explains this pretty quickly.
Let’s say you have a $3,000 credit limit on your credit card. And your balance is $3,000. That’s maxing out your credit card. If you aren’t careful and miss a payment, your finance charges could push your balance beyond $3,000, which also creates new headaches, like fees. So, at the very least make your minimum payment and make it on time.
Listen, gazing at the balance of your maxed out credit card for the first time can be a terrible shock. I know because I’ve experienced that moment. It isn’t pretty.
But I survived it and got out of debt. And with persistence and a debt-reduction plan, you can, too.
What to Do When You Max Out Your Credit Cards
Basically, you have two problems right now. First, you have credit card debt, and that’s stressful. Second, there’s likely been damage to your credit score.
The most pressing issue is the compound interest that’s racking up on your balance each month, so let’s tackle that first. Then, I’ll explain why you shouldn’t obsess over your credit score while you’re going through this.
Step 1: Embrace Reality (Not As Hard As You Think)
It takes courage to stare down your debt and admit that you’re in credit trouble. Whether you’re in debt due to impulsive buys or as the result of a divorce, illness or unemployment, the steps back to financial freedom are similar.
This is also a good time to think about how you got into debt. If it’s a medical crisis, I feel for you. That one’s tough, but you still have to deal with the financial fallout. Call your card issuer and explain your situation. You might be able to get relief, such as skipping a monthly payment or getting a lower annual percentage rate.
If you maxed out a credit card because you’re a shopaholic, then you need to look at why you’re overspending. Reckless spending often points to an emotional issue you need to address.
Whatever the reason, if you haven’t been monitoring your credit card account or tracking your expenses, then you’ve been using a credit card like it’s a free pass at Disney World. There’s a simple solution for this problem.
Step 2: Stop Using All Credit Cards
Even if you have low balances on other credit cards, don’t use them again until you’re out of debt. If you’re using your credit cards to survive month to month, then consider talking to a credit counselor. Start your search with the National Foundation for Credit Counseling. Act now before it gets worse.
Oddly, you might have the urge to get a new credit card during the early stages of paying off the balance. Resist the impulse to get a new credit card with a shiny new credit limit. The hard inquiry on your credit will take points off your credit score, but more importantly, you might overspend with a new card.
You can’t hit a moving target, so don’t add to your debt. Are you with me? OK, now it’s time to make sure you have the tools to pull this off.
Step 3: Set Yourself Up for Success
There are some basics when it comes to managing your money, and I call this your “personal finance foundation.”
I call it this because, to me, it feels like the foundation of a house. You can’t build a house on a shaky foundation. In personal finance, a shaky foundation leads to all kinds of problems, including debt. A solid foundation involves having a budget, tracking your spending and paying all of your bills on time.
This isn’t as daunting as you might think. There are lots of free apps and personal finance websites to choose from. Pick one you feel comfortable with. Then, enter your budget numbers and start monitoring where your money goes.
Step 4: Slash Your Budget to Smithereens
All right, now you’re on the move. Whether you have maxed out only one card or five, you have to pay more than the minimum payment on your credit card balance to make progress.
Decide what’s essential to your happiness and what’s more of a “want” than a “need.” Be ruthless. You’re going to take the money you save from the cuts and add it to the minimum payment of your target credit card, which we will identify in Step 5.
If it helps, remember that this is a temporary situation. You’ll have the freedom to choose how you spend your money when you’re out of debt. When I cut expenses to pay off my debt, I gave up a ridiculously expensive health club membership and started working out at a local gym.
After I got out of debt, I actually stuck with the cheaper option. So, your budget cuts can be temporary, or you might learn that your priorities have changed when it comes to really living within your means.
And don’t take away everything you love. If you look forward to your latte, keep your latte. But you’re going to have to cut something else in the budget to pay for it.
Step 5: Decide Your Game Plan
If you still have an excellent credit score, a balance transfer credit card is a good option. You’ll get a 0% APR for a period of time, usually about 12 to 18 months.
This gives you a chance to pay off – or at least pay down – the balance during an interest-free period. The trick is to figure out what your monthly payment has to be so you have a zero balance before your new APR kicks in.
If your score isn’t high enough for a balance transfer credit card, then consider getting a debt consolidation loan or just choosing a debt-reduction strategy on your own.
If you decide you need to pay it down on your own, there are a few good options. If it’s only one card, then it’s easy. That’s what you focus on. But if it’s more than one card, then make a list with the following information: name of the card, the balance and the APR.
Do you get excited about saving money? Then consider the debt avalanche method. List the cards from the highest APR down to the lowest. The card at the top of the list is your target credit card. This way, you tackle the card that’s charging you the most interest.
On your target card, pay more than the minimum payment. Remember the money you saved from Step 4? Now’s the time to apply your budget savings to the monthly payment of your target credit card. On your other cards, just keep paying the monthly minimums.
If you’ll get more of a rush from paying off a card quickly, then choose the debt snowball method. On your list, rank your credit card balances from the smallest debt to the largest amount. You target the smallest one first and get a sense of accomplishment more quickly. Note that you’ll pay more interest this way.
When I got out of credit card debt, I combined the methods to create my own strategy: the debt blizzard. I paid off my smallest balance first (snowball) and then switched to paying off the card with the highest APR (avalanche). Best of both worlds.
Step 6: Don’t Obsess About Your Credit Score
Every month, as your balance gets smaller, your score will get higher. A bad credit score is just a temporary side effect of maxing out your credit card.
Here’s why: The credit utilization ratio is the amount of credit you’ve used compared with the amount of credit you have available. The FICO score factors in your utilization ratio in two ways. It includes the ratio across all of your cards, but it also looks at the ratio for each individual card.
So, if you have a maxed-out credit card, your utilization ratio shoots up. When your ratio goes above 30%, it usually decreases your score. But if you want to improve your score more quickly, keep your ratio under 10%.
You can keep track of your score by signing up for a free educational credit score from one of the major websites that offer this. Or even better, if your card issuer gives you a free credit score (and some of these are actual FICO scores), pay attention to the number.
But don’t waste time having angst over it. As long as you’re sticking to your debt-reduction plan, your score will look better every month.
‘There is no new normal’: Worcester small business owner pivoted during COVID-19 and expects only more change after pandemic
It took about eight minutes for the bank to reject Natalie Rodriguez’s application for a loan through the Small Business Administration.
Rodriguez opened Nuestra, a Puerto Rican inspired restaurant in Worcester, in January of 2020. When COVID-19 arrived months later she discovered Nuestra wasn’t eligible for the federal or state funding that thousands of other establishments received.
To qualify, restaurants were required to show payroll and salary for years before 2020. Those figures didn’t exist for a restaurant that weren’t open in 2019.
“[I was] determined and knew that ‘no’ is not an OK answer,” Rodriguez said. “A door may close but you may need to kick down another door.”
Rodriguez then applied for conventional loans only to be led to more closed doors. Less than 10 minutes after applying for an Economic Injury Disaster Loan, she received notice that her poor credit score resulted in her application being denied.
Rodriguez used the dead end with the SBA to create a new path for herself and Nuestra.
She not only learned how to improve her credit but wanted to ensure others didn’t have to follow her journey as an entrepreneur.
Rodriguez extended the “Nuestra” brand to include financial advising. She started Nuestra Financial in April of 2020.
“Now I’m helping others. I’ve been able to restore my credit,” Rodriguez said. “I’ve been able to help others restore their credit and be able to help them make a business themselves if they so choose. I’ve been able to survive.”
Without grants and other funding, Rodriguez managed to keep her restaurant open through funds generated from Nuestra Financial.
“I was very quiet about it in the beginning. I didn’t want people to be like, ‘Oh look at this girl, she just opened a restaurant in the middle of a pandemic,’ and talk smack,” Rodriguez said. “About a month or two later, a light bulb hit and I was like, nobody pays my bills but me. I needed to mind my own business and not worry about what other people thought.”
In creating Nuestra Financial, Rodriguez said she’s helped Worcester residents restore their credit and purchase new vehicles and homes.
Rodriguez said financial literacy is rarely taught to children in school and wasn’t something she learned. When a situation arises like a rejection notice for an economic disaster loan, many don’t know how to respond or where to find answers.
Rodriguez said she’s helped young and old people, along with those who have bad credit or no credit.
“We lack the confidence, including myself, because we weren’t taught,” Rodriguez said. “So if you don’t know something, you weren’t taught, you’re not going to be confident about it.”
Coming out of the pandemic, Rodriguez remains confident about both her businesses. Nuestra, the restaurant, while closed for daily service continues to provide catering services. Rodriguez is still preparing what the future holds for the restaurant but plans to announce an update soon.
As masks start to become less a part of daily routines, Rodriguez, as a small business owner, doesn’t envision many differences from this year to last.
So many aspects of life remain uncertain from rising food costs to a potential third booster for vaccines and whether the country will ever reach herd immunity for COVID-19.
The pandemic arrived with Rodriguez immediately pivoting. As it approaches its potential end, Rodriguez will continue to do what helped her to navigate it.
“I feel like there is no new normal just yet,” Rodriguez said. “I think we’re all just trying to adjust and pivot at the same time and getting creative. I think it’s where we all are.”
Columbus Mattress Wholesale moves to newer, larger Gahanna store
More than four years back, Cathryn Clark’s boyfriend, Christopher Robbins, was on the hunt for a new mattress. He just couldn’t find one at an affordable price.
Clark, 29, and Robbins, 34, who are now engaged, were living in Franklinton, where they still live today.
They had no experience owning or operating a small business; Robbins worked as a retail assistant for SAS Retail Services while Clark worked as the communications director for two Methodist churches.
But in 2017, Robbins, with Clark at his side, took the leap and opened Columbus Mattress Wholesale on the West Side, with the goal of helping low-income consumers secure mattresses and other bedtime products.
“We really wanted to bring a store to people that, you know, they weren’t paying an arm and leg, but they still could get a good night’s sleep,” Clark said.
Customers at Columbus Mattress Wholesale can pay cash or credit, for example, but the business also works with financing companies that serve people without credit scores, with bad credit or who are lower income.
Last month, the business made a big move. It expanded from its original location on Harrisburg Pike to a store double the size at 435 Agler Road in Gahanna.
Clark said she and Robbins saw a need in the broader area, with many of their customers coming from outside the Hilltop, such as Linden.
Nestled between Dollar Tree and the Ohio BMV in Gahanna, the new storefront opened Memorial Day weekend and sells mattresses, bed bases, bed frames and pillows. Mattress prices range from under $100 to more than $1,000, depending on the size and brand, which includes some well-known names such as Serta, Beautyrest and Casper.
Clark said while she and Robbins originally sold solely Ohio-based brands, they’ve branched out to national brands as business has grown.
Columbus Mattress Wholesale also offers free same-day delivery on most orders from customers living in Columbus.
Clark does a little bit of everything for the business, from running communications, to working on the sales floor, to managing the sales team, to ordering what they sell.
She said a big mission for herself and Robbins, beyond doing business, is aiding the community.
“We’ve seen a lot of people struggle,” Clark said.
Clark said she and Robbins work to mentor other people who are hoping to open or currently own a small business. She added that the store starts employees at $17 per hour.
She and Robbins haven’t decided yet what they will do with the original location — which is currently closed — but said they might shift it into an accessory store.
A Guide to Getting Mobile Deals with Bad Credit History
You’re interested in a new mobile deal but there’s only one thing that’s stopping; you’ve got a bad credit history. Does that mean that your hopes of getting a new phone contract are crushed? Well, not exactly. In this article, you will learn how to get a mobile phone with no credit check required and how you can navigate the issue to get a great deal even with bad credit history.
Why is a bad credit history a big deal?
When taking a new phone contract, it means you’re entering into a financial agreement that requires you to make payments in monthly installments. As such, many providers of the service will want to ensure that they’re entering into an agreement with someone who will pay the agreed amount without violating the terms.
The best way for them to have that assurance is by looking into the credit history of the client. But does it necessarily mean that if you’ve got a bad credit history you can’t honor your side of the bargain in a phone contract? Of course not; which is why this article gives you the options you can pursue to end up landing a pretty impressive deal.
Although you might not find a deal that includes the latest devices in the market, you’ll not lack a relatively cheaper but functional option. For instance, if you’re a great fan of the iPhone, you might end up landing the iPhone XR instead of the latest release of iPhone 12. When the deal is cheaper, you stand higher chances of success as opposed to one that just dropped in the market and so it’s in high demand.
Another alternative is to find a contract that comes with a used handset as such tend to be less strict in terms of credit history requirements. That means you’re likely to pass the test of a contract with an already used gadget as opposed to that of a brand new phone.
Another alternative could be to go for SIM only deals especially if you already have an alternative source for a handset. Most of the providers won’t require you to sign any contract and so they’ll not look into your previous credit history. SIM only deals tend to be intensive on minutes, texts and data offers.
Networks that favor people with bad credit
There are networks that are more lenient to people with bad credit history than others. Major networks including Vodafone, O2 and EE usually come with strict requirements that might only frustrate you. The following are the alternatives you could consider looking into:
Smarty:The company offers SIM only plans that don’t require you to sign any contract. If you have an alternative handset, this could be a great alternative to consider as they won’t do a credit check on you. Their services and offers run on a monthly rolling basis which means you can walk away at any time in case you’re dissatisfied with the quality of service you’re getting. Their deals start at 2GB of data and unlimited texts and calls at a cost of £5 to unlimited calls, texts and data for £16.
Giffgaff:You won’t be subjected to a credit test here as well during sign up for one of the packages that the network offers. You’ll be required to sign up for a monthly bundle of your choice that’s inclusive of calls, data and texts. You can proceed with the same plan or switch to a new one after the month is gone. Most of their deals start at £8 a month.
VOXI:The network has numerous offers that operate on a 30-day rolling basis. They also won’t bother performing a credit check on you as it has no use in the first place. A bonus with this network is that they won’t include the social sites you frequent in their data charges.
Mobile phone to go with a SIM only deal
The SIM only deals we’ve highlighted above means that you’ll need to have a separate handset. In case you don’t have one already, you can take a separate mobile phone contract to go with your preferred SIM only deal. The other alternative is to buy one outright. But in case you don’t have money to make the purchase, you can always save up and buy when you’ve accumulated enough.
Some great smartphones that are classic and yet won’t put a huge wall in your pocket. Coveted brands such as iPhone and Samsung have great devices such as the Samsung Galaxy A52 5G that goes for £349 and the iPhone SE valued at £399. As you can see, with some savings, you should be able to get your hands on these gadgets and many others out there. And if you feel that these cost on the higher side, you can opt for refurbished phones. Refurbished phones refer to those handsets that have been used but have undergone intensive testing to ensure they still have got higher functionality.
When do credit checks apply?
Credit history is required by providers that have a mobile phone that requires a payment plan spanning several months or years. In most cases, the major network providers including EE, O2 and Vodafone will do a background check on your credit check before allowing you to sign up for their deals. Some factors that might make you have a poor credit rating is when you’ve missed several months’ payments, made late payments or placed too many credit applications concurrently.
Want to improve your credit rating?
The following are several steps you could consider to help you improve your credit rating. Most of these revolve around efficient management of your money, bills and other forms of payments.
- Have a proper and functional bank account
- Pay all your outgoing bills on or before the due dates
- Ensure you’re registered on the electoral roll
- Don’t share your account with a person with poor credit rating
That’s how you can work out things to get mobile deals even if your credit history isn’t a good one. But going forward, the best action plan would be to work towards improving your credit rating so that you can take advantage of the opportunities that come up in future.
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