We all know that getting into credit card debt is a bad idea. Most cards charge double-digit interest rates, so carrying a balance from month to month can get seriously expensive.
But credit card debt can also do damage to your credit score, and maxing out a card — that is, charging up to your credit limit — is particularly harmful. This is because 30% of your credit score is heavily influenced by your credit utilization ratio. If you’re using more than 30% of a card’s available credit at any time, your score could be getting dinged.
Given all this, it might surprise you to learn that there are four situations in which maxing out a credit card could make sense. Be sure to read the information below carefully — there’s a lot of nuance to each scenario!
1. You’re in a serious emergency
If your health or safety is at risk, your credit score shouldn’t be a top concern. When maxing out your credit card is the only way out of a serious emergency, don’t hesitate to reach for plastic.
This reason for charging up your card shouldn’t be taken lightly; it might be smart to first establish just what constitutes a serious emergency. For instance, your car breaking down on a busy highway probably qualifies, but wanting to take a last-minute vacation with friends likely doesn’t. Setting up these parameters will help you avoid making a mistake that could seriously hurt your credit.
2. You’re racking up…
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