Friday, October 18, 2013

Does It Make Sense To Use Credit Cards During Emergencies?

It seems like a good idea to get rid of all your credit cards save for one. The purpose of this one credit card that will be left behind is to help you maintain a good credit score and help tide you over an emergency situation.

But then again, is it really a good idea to use your credit card in times of emergency? If you had just gone through the tedious debt consolidation or the risky debt reduction, you are sure to be committed to staying away from debt. Don’t you think that an emergency credit card can push you over another debt pit? There are instances wherein this seems like a good idea but do you really want to rely on it when the unexpected happens?  

The thing about the unexpected is you do not know when or what will happen. There is no doubt that your emergency credit card can handle the amount no matter how expensive it is. However, there are a couple of important facts that you may want to consider.

First of all, you just solved the unexpected situation with another problem. Remember that you just used a credit card to pay for that situation. Although the crisis is past, you have to face yet another problem - paying off the debt on your card. Remember that any purchase that you will make must be paid back to the creditor. If you spent it on an expensive purchase, you will be carrying it over to the next billing cycle. That will incur finance charges and grow your debts. The interest in itself is a waste of your money.

Another problem that you may not realize at first is you will no longer be forced to look for better options. Using credit cards are much more hassle free and convenient. Why go through all the trouble of looking for financial assistance from government agencies when you can easily swipe your card to pay off something? You will be losing the benefits that you could have qualified for.

Lastly, and as mentioned previously, using credit cards to tide you over an emergency situation will endanger you to fall into another debt pit. You do not know how much it will really cost you. One emergency can drag you back into debt. You have to go through the debt relief process all over again.

It is alright to keep your card but it has to be for the purpose of keeping your credit score high. That way, the expenses you make on your credit account will be something that you planned and budgeted for. You can pay it off immediately and that will really keep your credit score up.

But what about emergencies? Simple. You have to save up some cash for it. A cash reserve fund will serve you better than a credit card. When you use it to pay off your emergency situation, you can forget about it immediately. You don’t have to worry about the payments that you have to make after. Your credit card can still be used but only when your cash fund is already depleted.

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