Emergency Finances: Breaking the Credit Card Rules
skirt circumventing credit card restrictions in exigency circumstances
Welcome to the real world! You're doing your best to stick to those personal finance rules, like never carrying a balance, applying for multiple cards, and avoiding using credit cards for emergencies. But then... life happens. And when it does, you might just need to break a few of those rules to stay afloat. Here's how to do it right.
Carrying a Balance
Straight Up: If you're in an emergency situation and don't have the cash to cover unexpected expenses, it's okay to carry a balance. But choose a low-interest credit card or one with an intro APR offer to avoid racking up huge interest charges.
Multiple Credit Cards
No Worries: Applying for multiple cards can be a smart move if you want to take advantage of different rewards programs or spread large expenses across various cards. Just avoid applying for too many at once, because this can hurt your credit score.
Utilization Ratio
Loosen Up: In an emergency, having a credit utilization ratio above 30% might be unavoidable. To lower this ratio, consider increasing your credit limit or adding a new credit card to your wallet.
Minimum Payments
Stay Afloat: Paying only the minimum balance can help you avoid late fees in an emergency situation. Just be sure to come up with a payment plan to pay off the debt as quickly as possible and avoid accumulating interest.
Reward Redeeming
Cash It Out: Redeeming credit card rewards for their maximum value is ideal, but in an emergency, cashing out for their full value might not be an option. If needed, cashing out for a lower value can help you cover expenses and get out of a tough spot.
Credit Score
Rebuild: Using credit cards during an emergency can hurt your credit score, but it's not a disaster. Make on-time payments, pay down your balance, and increase your credit limit to help get your score back on track.
Credit Cards for Emergencies
Choose Wisely: Look for credit cards with a 0% APR introductory period, no annual fee, rewards programs, fraud protection, and other features that can help you navigate an emergency with some financial flexibility.
The Wells Fargo Reflect® Card, Chase Freedom Flex℠, and BankAmericard® Credit Card are all excellent options for emergencies due to their long 0% APR introductory periods and lack of annual fees. Use them wisely, and you might just get through that financial emergency without too much damage. Good luck, and remember – life happens!
- In an emergency, cardholders might require to carry a balance, but it's crucial to choose a low-interest credit card or one with an intro APR offer to minimize interest charges.
- During emergencies, applying for multiple cards can help cardholders take advantage of different rewards programs or spread large expenses across various cards, but avoid applying for too many at once to protect the credit score.
- Having a credit utilization ratio above 30% during emergencies might be inevitable, and to lower this ratio, cardholders can consider increasing their credit limit or adding a new credit card to their wallet.
- In an emergency, when paying only the minimum balance can help cardholders avoid late fees, it's important to develop a payment plan to pay off the debt as quickly as possible and avoid accumulating interest.
