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Considering your credit card a lifesaver during emergencies might not be justifiable. But let’s face it: debts are inevitable for a salaried individual from an upper-middle-class family. Along your route to closing a debt with monthly EMIs, you may face a financially crucial scenario where you need more funds. So, there’s no point in disagreeing the benefits of credit card in emergency situations.
So, credit cards are the most convenient payment mode for everyday use. Having a credit card offers financial support during emergencies. Now, your question might be: how does a credit card help during emergencies? To help you evaluate the answer, this post narrates further about the use in detail.
A financial emergency is a situation when you need urgent funds, and you can’t postpone due to serious consequences. These circumstances generally affect your health, house, livelihood and basic survival.
Common financial emergencies are: –
These situations come without any warning. This situation needs immediate action, and you can’t delay till your next salary. You will require immediate funds to deal with this situation.
Also called plastic money, a credit card can be used as an emergency fund. After all, it offers a credit facility for customers to borrow funds within the pre-approved limit. It lets customers make transactions for the purchase of services and goods. Notably, the credit card limit is an important aspect that the card issuer determines depending on parameters like credit scores and income.
You will find details on the cardholder’s name, signature, expiration date, and card number, among other details. You can use plastic money in emergencies. Let’s find out the benefits you can get with credit card use in emergency.
From offering instant access to funds to covering unforeseen expenses, having a credit card offers numerous benefits. Ultimately, using a credit card for emergency offers peace of mind and financial protection. Let’s find out how:
A credit card offers a degree of ease that makes a big difference during stressful emergencies. You do not necessarily have to think of running out of cash. All you need to do is swipe your card and make a quick payment. This offers you peace of mind.
Unlike any financial asset or savings account, a credit card offers instant funds during an emergency. For instance, if you consider a financial asset, you would require time to liquidate the amount. However, with a credit card, you can get instant cash loan. Whether you want cash for car repair or a medical emergency, this card covers your expenses, especially when you need it the most.
Moreover, a credit card for emergency offers an additional financial cushion for individuals to manage financial crises. The flexibility you get with its usage is notable.
A cardholder gets peace of mind with flexible repayment procedures for credit cards. In addition, you can also get cashback, which offers a little financial relief.
Credit has some unique features which are quite helpful during emergencies.
A credit card comes with a pre-approved limit. So, when an urgent need for money arises, you don’t have to wait for any approval or permission. You just have to swipe the card, and the need gets fulfilled.
Credit cards are accepted everywhere. Hospitals, pharmacy stores, travel booking apps, roadside repair shops and all emergency-related vendors accept credit cards. Hence, when faced with an emergency, you can easily use the credit card.
Many credit cards also come with an EMI facility. It allows you to repay the debt in EMIs. This helps a lot if emergency expenses are huge. You don’t have to pay the entire amount in one go. You can plan your repayment without affecting your budget.
Certain credit cards have additional features like emergency travel assistance and cash advance facility. This can be very helpful during an emergency.
Certain credit cards reward you for their usage. When you use the credit card for any transaction, you get reward points or cash back. This reduces your dues during emergencies and provides a little bit of financial relief.
One of the major advantages of a credit card is the interest-free grace period. This is a period during which, if you pay the bill, you won’t be charged any interest. This period can range from 18 to 48 days.
Emergencies may occur at any time, from unexpected car repairs to a sudden wedding invitation or medical issues. You should have funds to deal with unexpected situations. In such crucial times, keeping up with your financial responsibilities becomes quite challenging.
The following are the times when a credit card used for emergency saves you financially:
A financial disruption may happen after losing your job without prior notice. In such scenarios, credit card usage offers temporary financial relief. It helps you cover expenses for necessary items like groceries, rent, and utilities until you secure another source of income. However, you should always use your card responsibly. That stated, you must always cut down on additional expenses on luxury items that aren’t necessary for the time being.
Alternatively, a credit card holder can combat a financial situation while relocating for a job. In those times when unexpected relocation becomes expensive, you can use your card to pay your moving expenses and make security deposits accordingly.
Besides job relocation, you may be called for a corporate meeting in your office’s main branch outside your hometown. In such cases, you can book last-minute accommodations with a credit card for emergency.
Unexpected home repair expenses may be huge for a salaried millennial, whether it’s a busted pipe, leaky roof, or broken appliances. Since the problems need to be addressed right away, you cannot neglect the condition. Instead, you must call the repair team to repair or replace the part. That’s where you need cash. You can use your credit card as an emergency fund in such circumstances.
Health crises may be associated with huge expenditures, even for people with medical insurance. A medical emergency is one of the most significant emergencies where credit card use saves lives. This is the time when you cannot compromise on quality medical treatment. The doctor may recommend admitting the patient, whether it’s sudden stomach pain or an accident.
Even if you have a medical or insurance policy, you may need instant cash for medications and hospitalization. That’s where using a credit card for emergency comes into play. Thus, having a credit card with a high credit limit might cover your expenses. There are several benefits of using credit cards for healthcare and pharmacy purchases. You may get offers and instant cashback.
Imagine getting sudden birthday and wedding invitations from friends and family. It becomes more significant if you are invited to a close relative’s wedding that occurs for nine to ten days in India. Considering the rituals of India, people usually gift gold accessories and jewellery to relatives on special occasions like weddings.
However, buying gold jewellery with cash might be quite challenging for a family of two salaried individuals. So, whether it’s a surprise baby shower or a last-minute wedding invitation, you can arrange your gift using your credit card for emergency. You can spread your expenses over different billing cycles with a credit card. So it becomes easier to manage repayment and ensure financial stability.
Suppose you are running out of cash. In such a scenario, you may use your credit card to access funds instantly. You may use it to restock your inventory or payroll and other services. It’s extremely flexible to use credit cards to make payments in a timely manner. However, you must maintain your business operation by using the card responsibly. If you know the smart ways to use credit card so, it can reduce financial crises during the need of the hour. Neglecting to manage your repayments might create further challenges.
Imagine yourself in a situation where you experience a sudden car breakdown. You would need additional expenses to repair the part by visiting the service centre or calling the professional team. What if you don’t have an emergency fund at that moment? This is where credit card use in emergency gets noticed.
You may also read this: Emergency Loan
A credit card can be very helpful during emergencies. But you should also be careful while selecting the credit card. An emergency credit card should help you during tough times. Here is what to look for: –
You may require some time to repay the emergency expenses. Hence, it would be advisable to choose the credit card that has a lower annual percentage rate (APR) or interest rate. So that even if you delay the payment after the interest-free period, it would limit your finance charges.
You don’t know how much amount you will need during an emergency. In certain situations, like hospitalisation or urgent travel, the need for funds can be huge. So, it’s good to choose an emergency credit card with a higher limit.
There are many online portals where you can compare annual fees, late payment charges and over-limit penalties of various credit cards. This can help you in getting a card that has reasonable charges.
If the credit card has a longer interest-free period, then you get enough time to repay the outstanding balance without paying interest. This helps in managing emergency expenses more efficiently.
Some credit cards offer additional benefits like emergency assistance services, insurance coverage, reward points or cash back points on essential spending categories such as healthcare, groceries and fuel.
Select a credit card as per your income, credit score and spending habits. Also, always pay the credit card bill before the due date so that you don’t have to pay additional interest and charges.
Besides offering instant access to funds, a credit card protects your credit score. However, as a responsible card user, you need to protect your score by making payments on time. This way, you can maintain an excellent credit history and apply for a personal loan in the long run. As of now, if you wish to use your credit card for emergencies conveniently, the following are the tips to keep in mind:
1. Spend, but Maintain a Good Credit Score
Based on the amount of money you require and the credit limit, you should use the fund. Otherwise, spending more than the given limit may damage your CIBIL score as it increases the credit utilisation score.
2. Ensure a Proper Plan for Repayment
Using your credit card to fund any emergency situation might be valuable. However, it is important to ensure a proper repayment strategy. Do not forget that you borrowed the money and need to repay it. So, ensure to create a repayment plan. Otherwise, you may end up paying a higher rate of interest.
3. Purchasing a Card and Forgetting to Use
A credit card that has not been used for a long time period may be cancelled. So, you must use it rationally and increase your credit score accordingly.
So, having a credit card for emergency helps you manage difficult situations with ease. However, you also have to deal with the mounting debt. So, by understanding the above tips and situations, you can sensibly use the card and follow effective financial strategies to pay the debt on time. Never share the details of your card with anyone, and always keep track of the credit card reward points. With these things in mind, you can use your credit card as an effective emergency fund in need of the hour.
Yes, you can withdraw cash from ATMs through an emergency credit card. This is called a cash advance facility. It carries high interest and fees from the day you withdraw money. Hence, you should hardly use this facility. It should only be used when you don’t have any other option.
Credit card usage doesn’t affect your credit score. But if there is a high credit utilisation ratio or you have missed credit card bills, then it can affect your credit score negatively.
Your emergency spending on your credit card depends on the credit limit of the credit card. You can spend up to the available credit limit.
Many banks and credit card issuers allow certain purchases to be converted into EMI. This makes large emergency expenses more manageable through monthly instalments.
If you are not in a condition to repay the full amount, then you shall pay at least the minimum due. But do remember that, even if you pay the minimum due, interest will be charged on your remaining balance. Other than that, you can also contact the credit card issuer and explain the situation to them. They may offer you some restructuring options.
If you have an international credit card, then it can be used to pay off emergency expenses while you travel abroad. But you need to be aware of foreign transaction fees and currency conversion charges.
It’s good practice to keep 20-30% of your credit limit free for emergency expenses. Low credit utilisation also improves your credit score.
Certain credit cards offer additional benefits like purchase protection, extended warranty, fraud protection and zero-liability policies for unauthorised transactions. This protection can vary among different credit cards.
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Unifinz Capital India Limited is a Non Banking Finance Company (NBFC) registered with the Reserve Bank of India (RBI). lendingplate is the brand name under which the company conducts its lending operations and specialises in meeting customer’s instant financial needs.
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