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7 Reasons Why You Shouldn't Use Your Credit Card in an Emergency ...

By Valencia

It's common to use a credit card in an emergency, but there are good reasons to consider other options. When you don't have cash and can't borrow from family and friends, using a credit card may seem like the logical choice – and sometimes it is. But there’s a price to using plastic. Here are seven reasons why you shouldn’t immediately pull out your credit card in an emergency.

1 Credit Cards Aren’t the Substitute for an Emergency Fund

Being disciplined and saving an emergency fund is one of the best ways to prepare for an emergency. However, some people fail to save money, and prefer to rely on credit cards when they’re in a jam. However, using a credit card in an emergency is not always the best solution. Change your mindset and realize that credit does not substitute for a rainy day fun. Start depositing a percentage of your check each week and you'll be better prepared to handle an emergency.

2 You Have Enough Debt

If you already have credit card debt and other debts, using your credit card during an emergency adds to your balance. Understandably, you do what you have to in tough times but rather than immediately pull out your card, brainstorm other solutions. There might be a way to handle your crisis without relying on credit.

3 High Interest Rates Are Costly

If you have a credit card with a 0% interest rate, using this card for an emergency isn't a bad thing, especially if you’re committed to paying off the balance in the next few months. But if you carry a balance on a card with a 13% or 14% interest rate or higher, and if you can't pay off this balance, one emergency could end up costing a lot more in the long run.

4 Multiple Emergencies Can Ruin Your Finances

Using a credit card for one emergency might not ruin your finances. But if you face a stream of unexpected occurrences, and you use a credit card for multiple emergencies, you can easily accumulate a ton of debt which puts a tremendous strain on your finances. Don’t underestimate the importance of saving your cash and preparing for a downturn.

5 You’re Less Likely to Look for Other Solutions

When your credit card is the fallback plan, you're less likely to look for other solutions to your financial problems. Going forward, pretend that your credit card doesn't exist. Besides, what would you do if you didn't have plastic in your wallet? In this situation, you would have no other choice but to think of alternative solutions. For example, some people ask their employers for an advance, and others sell personal items.

6 You Can’t Pay off the Balance

When you use credit for big emergencies, there’s always the possibility that you won’t have the resources to “ever” pay down your cards. And unfortunately, this can add to your stress. Not only financially, but also emotionally. And the more you stress about money, the worse you’ll feel. Some people deal with money-related insomnia, and sometimes, money fears completely take over.

7 Creates a Domino Effect

If you use your credit card for an emergency and get deep into debt, the fact that you owe your creditors can slow down your savings goals. All of your disposable cash may go toward your credit cards, and this can hinder your ability to save for the future.

Financial experts stress the importance of building a rainy day fund. But understandably, this is much easier to say than do. You might not be able to build a large cash cushion in a short amount of time, but something is better than nothing. What are other reasons to avoid using credit during an emergency?

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