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Credit Cards are NOT an Alternative to Emergency Funds

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by Harriet Bond
(San Francisco, CA, USA)

Credit cards can be helpful when there is an emergency and an emergency plane ticket or other item must be purchased that there is simply no room in the budget for – like car repairs. Unfortunately, the majority of consumers use the credit card in place of an emergency fund!.

An emergency fund can help to ensure that the consumer is going to have something to fall back on in the case of those unexpected expenses, a job loss and other times when money is required but there is simply no room left within the budget.

Though difficult to begin, consumers should realise that with an emergency fund it’s okay to start small. Stocking away fifty or one hundred dollars a month in a savings account can be an effective way to start saving.

Finding additional money through bonuses, tax returns and other sources of found money can help to boost the fund – and that way the consumer is going to have another option aside from the credit card in the future.

Unlike emergency funds, that collect interest on the funds that are deposited into the account the credit card will cost the customermoney when used, as most consumers are unlikely to repay the credit card in full before the grace period is over and the interest begins to accumulate for the purchases that have been made.

In addition, credit cards that are used for emergency funds often find that large purchases are placed on the account, meaning that it can make it difficult to repay the credit card account on time, since themoney wasn’t found in the budget in the first place.

Finding that bit of extra money in the budget to establish the emergency fund can help to save the customer money, and ensure that there is going to be something to fall back on in the future.

Updated: November 23, 2015 — 7:42 am

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