Excessive Credit Card Debt: How Much is Too Much?

Do you have excessive credit card debt? When it comes to credit card debt, excessive is a very subjective thing. What may be excessive for you, might not be for the next guy or gal. After all, we are dealing with personal finance here. It's personal. We're all on different levels. Still, there are some fundamental concepts that you need to be aware of that will help to shape your definition of excessive. How you perceive interest charges, credit card limits, credit score factors, and debt in general, will have a big impact on what you think is excessive.

Different Approaches to Credit Card Debt

Your definition of excessive will depend on your approach. Check out these 4 common approaches to credit card debt.

1. The Whole Idea is Excessive (i.e. Just Don't Do It)

Some people completely stay away from credit card debt. In fact, they might not even have one. Some people I know have cut up their cards and swear never to use them again. This is often routed in a deep belief that credit is a danger, or even an evil, that shouldn't even be used. People in this camp typically turn to a reward debit card if they want to join in on the whole rewards points thing. To this person, just having a credit card and considering it for potential use is excessive.

2. Any Balances Carried Past a Month Are Excessive (i.e. Use Credit and Take Advantage of It)

Folks in this group like to take advantage of the benefits that credit cards offer, without being subject to the negative aspects of card. They like to say they “use credit responsibly”. 😉 This means they don't carry a credit card balance out past the term. So they pay no interest charges or late fees. They also rack up rewards points that the credit card company offers. To this person, any credit card debt that you have to pay interest on or that you don't earn cash back card rewards on is excessive.

3. Any Balance Over 30% of Available Credit is Excessive (i.e. Just Use Credit a Little)

When you carry a balance on your credit card that is in excess of 30% of your credit limit (i.e. line of credit), then you run the risk of negatively affecting your credit score. The bureaus see that as a sign that you are relying too much on your debt. With this in mind, some credit card users don't mind the occasional balance. But they know about the 30% rule, so they keep the balances low. To this person, any credit card debt above 30% of the credit limit is excessive.

4. Any Balance at or Exceeding the Line of Credit is Excessive (i.e. Use the Heck Out of Credit)

Some people simply don't know, or don't care about the high interest that comes along with credit card debt. They constantly keep their credit cards maxed out, but don't breach their limits. They may even pay on time and never incur a fee. But they pay big amounts in interest payments. They see this as the cost of the convenience of credit. To this person, any credit card debt above the total credit limit is excessive.

For the record, I think #1 and #2 above are the only way to go. And if you aren't there, you need to be working yourself in that direction. However, I realize there are times in your financial life where you find yourself settling for the #3 and #4 approaches. I've been there myself.

Getting Rid of Your Excessive Credit Card Debt

If you've come to this post and you are trying to eliminate your credit card debt, then here's a 6 step plan for you:

  • Do whatever it takes to stop using the credit cards
  • Write down your current credit card debts
  • Prioritize them based on balance or interest rate
  • Start using every extra dollar in your budget and pay the first card off
  • Repeat that last step until all your cards are paid off
  • Enjoy being in control of your credit card debt

Have you ever had excessive credit card debt? How do you define excessive?

Photo by Andres Rueda

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  1. The last couple of years have been really tough without employment, and rising health care costs. I used my credit cards to live on. The balances got to high, so I had to sell some investments to pay off a credit card. I also transferred a balance to a 0% credit card so I can pay it off. I am now taking classes on how to manage my finances. Accountability is really the key.

    • Philip Taylor says:

      Thanks for sharing your story, Sunflower. Congrats on your success so far and good luck to you in the New Year.

  2. Money Obedience says:

    I define it with your first definition. I think #3 would be silly for me since I have a few credit cards with a pretty high limit. If I ever go to 30% of available credit on one of them, I think I would freak out. Never mind going to 30% on my overall credit lines.

  3. Tim Gordon says:

    Good article. As for me, I always pay on time and i never let a month’s previous debt to carry on to the next month.