O’Bryan Law Offices represents Bankruptcy clients throughout all of Kentucky and Southern Indiana. We offer in-person and video/telephone consultations for people so they can understand their financial options from the comfort of their own home.
Call now for a FREE consultation!
Close this search box.

O'Bryan Blog


How Much Credit Card Debt Is Too Much?

how much credit card debt is too much

Table of Contents

Today’s generation hardly understands the right questions to ask to build and mold a positive future for themselves. For some, it’s the ongoing need to fit in with society. For others, it’s trying to simply keep up enough cash flow without having to make a balance transfer. Regardless, debt collectors within the debt collection agency have had increased job opportunities because credit card spending is out of control. You may find yourself frequently wondering, “How much credit card debt is too much?

Unfortunately, many realize they have a significant financial situation a little too late. Understanding how much monthly net income you make, your gross monthly income, and the total net monthly income before spending money on monthly payments will help prevent multiple debts. Additionally, if you save money for a larger down payment before making a big purchase, this also prevents debt accumulation.

But this still does not answer the question, how much credit card debt is too much? The answer is not always black and white. The more important questions are: Do I have enough money to pay this credit card debt back? Or do I make enough money to make this purchase? What kind of interest charges will I see?

When people borrow money,  debt often accumulates to the point where the burden outweighs the value. With minimum, the debt won’t even begin to decrease. As the interest rates rise, credit card maxing tends to follow. However, the level of accumulation of debt depends on missing payments, meaning that the sooner you realize your debt load, the quicker it is to resolve the credit card companies’ temptations.

Do I Have Too Much Credit Card Debt?

credit card debt

Understanding an individual’s debt load can be a game changer. However, most individuals have different factors that play into the matter at hand. For instance, someone may have a card issuer who approves a higher credit limit than a separate card issuer when initially checking their total credit limit. Determining factors that make up a credit limit include your monthly payment history, if you have applied for any payday loans, how many balance transfers you make monthly, if more than one card issuer is involved, and if making minimum payments is met monthly.

The thing is, everyone’s perspective on how much credit card debt is too much debt varies on numerous things like net income, monthly income, and how many monthly payment- arrangements are involved with your bank account to be able to answer that question. Luckily, the 6 indicators are listed for you below to help raise awareness of when you have too much credit card debt.

Your Credit Utilization Ratio is High

To simplify this with a mathematical equation, look below.

Total Balance / Total Credit Limit = Credit Utilization Ratio

What this means is that when your credit card bills and credit card balances are too high, this can have a negative impact on your credit report. When calculating an individual’s credit score, the credit utilization rate carries a large portion of importance in determining how many credit limits a card issuer will allow. Although this isn’t the only determining factor involved in credit limit distribution, it certainly plays into 30% of how much and who will lend money without a concerning level of risk.

Think of the credit utilization ratio as less is more. Having a lower credit utilization ratio is the best way to keep your credit limits in “check,” so to say. Though many misinformed individuals carry on the tall tales that paying the minimum payments on credit card debt is the way to achieve a higher credit score, the truth could not be more opposite. The truth is paying off the monthly credit card balances is, in fact, the best way to increase your credit report and credit score.

You’re Making Credit Card Payments With Other Credit Cards

When you need a separate credit card to pay the total balance for another credit card debt or to make the minimum payment, this could be a sign that you have too much card debt. Trying to limit spending will help level the credit utilization ratio. This could prevent needing multiple credit cards. Additionally, using a credit card balance transfer to be able to pay off a separate card debt may only hurt you in the long run.

Although some might get by with making minimum payments towards the credit card balances, the truth is credit card issuers see a minimum payment and often view this as a sign that the minimum payment may be all your monthly income will allow. Therefore, needing things like auto loans if your car breaks down could be challenging. Other issues could be that the auto loans are approved with an incredibly high interest rate, which will likely double the cost of the personal loan by the time it’s paid in full.

You’re Only Making Minimum Credit Card Payments

Unfortunately, those who barely get by with a minimum monthly payment likely have limited available credit. When your financial situation repeatedly tends to carry credit card balances, this is a warning/red flag that you have too much credit card debt. Card debt should not be carried into the next billing cycle.

Although these minimum payments can get you off the hook for a short period, in the grand scheme of things, you will likely resort to balance transfers to pay off the total balance in the end. However, not everyone has a balance transfer card to save too much debt from stacking up. Sometimes, even the minimum payments are hard to meet when too much debt accumulates.

Should the question still linger in your mind of how much debt is too much debt, consider looking into having a debt consolidation loan. Keep in mind that debt consolidation in Kentucky can  be a risky choice. Bankruptcy may be a safer option for you.

The Louisville O’Bryan Law Offices can help guide you through the steps to save you money, all while trying to reduce multiple debts at once. Our family-based bankruptcy attorneys have helpful credit bureaus’ tips for your credit history, guidance for credit card issuer-related hiccups, steps to reduce your interest rate, and financial moves to illuminate and minimize your debt payments.

You Have a High Debt to Income Ratio

If you have a high debt-to-income ratio, the chances of a card issuer allowing you to start a new credit are unlikely. The debt-to-income ratio helps measure the appropriateness of loan approval. For example, if you already have a debt collection agency reaching out regarding the lack of cash flow, unpaid revolving debt, or missing payments due to a lack of monthly income, a credit card lender may be hesitant to approve personal loans or cash advances.

This debt-to-income ratio equation is determined by the following formula.

Total Balance Monthly Debt Payments / Total Gross Monthly Income = Debt to Income Ratio

Gross income shows how much money an individual makes prior to their employer taking deductions like taxes, insurance costs, etc. Typically, your gross monthly income will be located at the bottom of your pay stubs. Taking the time to calculate how much you make and keeping the credit card bill below that number will likely help in the prevention of overspending, saving money, and card debt accumulation.

You’ve Maxed Out Your Credit Cards

Even a credit card has its limits. If you are border-lining your max credit limit, it is time to take a step back and re-evaluate if you have too much credit card debt. For some, this is an option. For others, when you have reached the max credit limit for this particular credit card, then it’s automatically time to look for a new credit card issuer.

Again, this is sometimes the only way some families are able to get by. Some families need the newly available credit for payments towards credit card bills to keep the company, house, car, and other income that a family relies on afloat. However, when your credit card payments are drastic in cost compared to your other bills, you may benefit from speaking with a Louisville bankruptcy attorney to gain control over your card debt. For more information on credit card debt resolutions, call (502)400-4020 to speak with an experienced O’Bryan bankruptcy attorney.

Your Credit Card Debt Payments are High Compared to Other Bills

Mortgage payments, monthly car payments, and insurance payments have been known to take a chunk from someone’s paycheck. Make sure you have enough money to pay these bills first since they require a roof over your head and can get your family from point a to point b to continue making funds. However, once these bills have taken most of your paycheck, leaving your family with no spare cash requires a credit card just to make ends meet. Although some do their absolute best to save money for things like gas, groceries, and other necessities, some families don’t have that lavish lifestyle, which is where credit card spending can lead to a challenging time for debt repayment.

When your credit card debt payments are larger than your other bills, you may wonder how much credit card debt is too much. If not, before long, you may wish you had. Before you reach the point where credit card issuers are turning your application down, consider speaking with a bankruptcy attorney regarding your card debt situation.

How Credit Card Debt Can Affect You

credit card debt kentucky

Many individuals struggle with card debt daily. The overall consequences for a family with card debt could face difficulty with the following.

  • Impacted credit score
  • Interest charges
  • Card issuers taking legal action against you

Interest Charges

Interest charges can sometimes become a complex issue. Generally, the more you pay, the lower the interest rate. This is why the less you are able to pay, the higher the interest rate becomes. The financial bind comes into motion when high-interest rates cause you to pay more in exchange for payment over a longer billing period.

Interest charges can be increased if:

  • Payments are missed or failed to be paid on a timely basis
  • If your credit score decreases
  • Increasing the prime interest rate
  • If under a promotional period that has expired
  • Annual increases

Credit Score

Other ways card debt can affect you is by lowering your credit score. When credit card spending reaches limits exceeding your net income, this can negatively impact your credit report. Anything like a personal loan or auto loan that requires monthly payments generally also requires your credit score to be within a certain range. Most often, this requires your credit history conditions to meet expectations for a credit card lender to trust you to pay back the borrowed money.

Not Qualifying for New Credit

The concern and struggle for many families truly begin to sink in when involved in a current financial bind, and your application gets denied for new credit. When available credit is provided and monthly debt payments are failed to be paid, lenders usually have reservations.

Legal Action

For families in a financial bind and personal loans are off the table, ponder speaking with our O’Bryan bankruptcy attorneys regarding a debt consolidation loan. Call (502) 400-4020 to speak with an experienced Louisville bankruptcy attorney.

How Can a Bankruptcy Lawyer Help With High Credit Card Debt?

Debt collectors can become an intimidating living nightmare. If their lawyers’ eager approach is successful, this means the court can rule to place property liens and prevent wage garnishment.

Having an experienced bankruptcy lawyer can help with high credit card debt, determine the appropriate bankruptcy chapter for your unique situation, and once bankruptcy has been filed, an automatic stay will be placed on lawsuits and collection agencies looking to pursue legal action against you. To learn more about how Louisville O’Bryan bankruptcy lawyers can help your family, call (502) 400-4020 to schedule your consultation.


Disclaimer: The use of the internet or this form for communication with the firm or any individual member of the firm does not establish an attorney-client relationship. Confidential or time-sensitive information should not be sent through this form.