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Life has a way of throwing unexpected challenges our way. When faced with sudden financial needs, Credit Cards can be a lifeline. However, using them wisely is crucial to avoid falling into a debt trap. You must learn how to use Credit Cards for emergency expenses effectively. But first, let's look at the types of emergency expenses you may run into.
Types of emergencies
Credit Cards can be helpful in various urgent situations. They can be used to cover unexpected medical bills during health crises, book last-minute travel for family emergencies, pay for sudden car repairs, or fund essential home repairs after unforeseen damage.
In cases of job loss, they can even help bridge the gap until new employment is secured. However, evaluating whether an expense is urgent before using your Credit Card is crucial.
Why use Credit Cards for emergency expenses?
1. Immediate funds: Credit Cards provide quick access to funds, allowing you to cover emergency expenses promptly. Credit Cards serve as a financial backup when other sources of funds are immediately unavailable.
2. Flexibility: Many Credit Cards offer the flexibility to repay in EMIs, which can be helpful if any emergency expense is significant and paying it off all at once in not feasible.
3. Emergency services: Some Credit Cards also offer additional services like emergency travel assistance and cash advance facility.
4. Offers and benefits: Many Credit Cards offer rewards, cashback or points for purchases or travel, which can be beneficial during emergencies and provide a little financial relief.
5. Interest-free period: If you can pay off the balance within the billing cycle, you can avoid interest charges.
Tips to use Credit Cards for emergency expenses
Do's:
- Assess the situation: Evaluate the urgency and create a realistic budget for essential expenses only.
- Choose wisely: Opt for a card with the lowest interest rate or look for promotional offers with 0% APR to minimise long-term costs.
- Pay strategically: Pay more than the minimum due each month to reduce long-term debt and interest accumulation.
- Plan for repayment: Develop a clear strategy to pay off the emergency expenses quickly to avoid prolonged financial strain.
Don'ts:
- Don't max out your Credit Card: Keep your credit utilisation ratio low to maintain a healthy credit score and preserve your borrowing capacity for future needs.
- Don't spend on an impulse: Stick to your emergency budget and resist the temptation to buy non-essential items.
- Don't ignore payments: Even if you can't pay in full, make at least the minimum payment to avoid late fees and negative impacts on your credit score.
Also Read: How to use a Credit Card effectively and smartly
Conclusion
Credit Cards can be invaluable during financial emergencies when used wisely. Always have a repayment plan and avoid letting short-term relief turn into long-term stress. While Credit Cards provide a valuable safety net, the best strategy is having an emergency fund and being prepared.
Disclaimer: This article is for information purpose only. The views expressed in this article are personal and do not necessarily constitute the views of Axis Bank Ltd. and its employees. Axis Bank Ltd. and/or the author shall not be responsible for any direct / indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information. Please consult your financial advisor before making any financial decision.
