By Rachel Morey


5 Min. To Read

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Many Americans suffered a financial setback in 2017. According to a survey conducted by the National Endowment for Financial Education over 60% of households said they had an unexpected expense during the year that couldn’t wait.

Unexpected and expensive car repairs, urgent home repairs, falling behind on bills, medical expenses, moving expenses, and job loss were among the most common causes of financial distress.

According to the National Endowment for Financial Education survey, 36% of respondents indicated that they plan to pay for financial emergencies in 2018 with credit cards. 31% said they’d tap into their emergency savings account, 28% said they’d pay cash for the expense, and 22% said they’d go into debt by getting a loan from their credit union or bank.

Financial advisors tend to agree that having between three and six months’ worth of living expenses set aside in an easy-to-access account to cover financial emergencies is ideal. Most households don’t have even a fraction of that amount saved for unexpected expenses.

To bridge the gap, it’s tempting to reach for credit cards. If you can afford to pay the bill before interest charges start to accrue, using credit cards to cover emergencies is financially harmless.

The average American household that carries a balance from month-to-month on credit cards owes $15,654 and pays $904 interest each year on the debt. Chronic health problems and medical costs that grow faster than income means that for many households, a large portion of credit card debt is made up of medical expenses.

27 million adults in the U.S. charge medical expenses not covered by insurance to their credit cards according to the Henry J. Kaiser Family Foundation. It costs them about $470 per year just to cover the interest charges on this debt.

Consumers who keep a credit card especially for emergency use should charge a small purchase every few months and pay it off right away to prevent the card issuer from closing the account due to non-use.

For people with decent credit scores, getting a credit card for emergencies with a credit line of several thousand dollars, a low interest rate, and no annual fee may be a smart move.

With a FICO credit score between 630 and 719, applicants may be eligible for the Chase Slate credit card with a 15-month 0% introductory APR and $0 introductory balance transfer fee.

The Citi Simplicity Card is the only card that offers a line of credit with no annual fee, no late fees, and no penalty APR if the cardholder makes a late payment. The 0% interest rate is good for 18 months on both balance transfers and new purchases. The greater of a 3% or $5 balance transfer fee applies.

Another popular zero-interest credit card for people with fair credit is the HSBC Gold Mastercard. Account holders get a late fee waiver, no annual fee, 0% introductory APR on purchases and balance transfers for the first 18 months of owning the card. Being able to pay for emergencies over time without worrying about high interest charges makes searching for a credit card to use for unexpected expenses a worthwhile endeavor.

What happens if you are put into a situation where you need some emergency funds? There are many options out there, but most are what we'd consider predatory. These emergency credit cards are a better option.

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