Maxed Out Your Credit Card? Know The Credit Score Damage

In today’s fast-paced digital world, credit card s are more than just plastic – they’re powerful financial tools. But misuse them, and they could become your biggest liability. Financial experts and even the Reserve Bank of India (RBI) have been ringing alarm bells for years now: don’t max out your credit card. Here’s why managing your credit utilisation matters more than you think.

What is Credit Utilisation and Why Should You Care?

Credit utilisation is the portion of your credit limit that you actually use. Let’s say your credit card limit is ₹50,000 – ideally, you shouldn’t spend over ₹15,000 (that’s 30%). Why? Because going beyond this ratio signals lenders that you might be financially stressed. And yes, that affects your credit score .

The 30% Rule: Your Credit Score’s Best Friend

Sticking to the 30% credit usage mark is a golden rule in personal finance. It shows you're disciplined and less risky as a borrower. For example, if your card limit is ₹1 lakh, spend no more than ₹30,000 – even if you can swipe for more. It’s not about affordability. It’s about credibility.

What Happens If You Go Overboard?

A high credit utilisation ratio is a red flag. Here’s what it can lead to:

• Drop in credit score
• Higher interest charges if you pay partially
• Struggle to get new loans or credit cards
• Fewer bargaining rights with banks
• Negative remarks on credit reports from bureaus like CIBIL and Equifax

Why This Matters Now More Than Ever

In the past 12 years, digital payments in India have surged 94 times. The number of credit cards has also doubled. But with this boom, defaults are rising too. RBI data reveals that credit card NPAs (non-performing assets) have shot up by over 500% in recent years. This means more users are falling behind on payments, hurting their credit profiles.

What Credit Card Users Must Keep in Mind

Your credit score isn’t just a number – it’s your ticket to future loans, housing approvals, and even better job prospects in some sectors. A poor credit score due to high utilisation can hold you back in more ways than one.

The Smart Way to Use Credit Cards

• Keep your spending below 30% of your credit limit
• Always pay your full bill on time
• Don’t rely on credit cards for non-essentials
• Monitor your credit score regularly
• Ask for a higher credit limit if your income grows – this can help lower your utilisation ratio

Time to Take Charge

Using a credit card responsibly isn’t just about avoiding late fees. It’s about building a strong financial reputation. So the next time you think of swiping your card for a fancy purchase, pause and check – are you crossing that 30% line?

A credit card is a tool, not a trap. Master the credit utilisation game, and you’ll not only stay debt-free but also open doors to better financial opportunities in the future.