Is A Credit Card Emergency Fund A Smart Idea?

Is it a good idea to have a credit card emergency fund? For most people, the answer is no. Before you think about having a credit card for emergencies, please read this. There’s a growing number of people who are looking to their credit card as their emergency fund. Some are doing it by choice,…

Michelle Schroeder-Gardner

Last Updated: May 28, 2023

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credit card emergency fund

Is it a good idea to have a credit card emergency fund? For most people, the answer is no. Before you think about having a credit card for emergencies, please read this.

There’s a growing number of people who are looking to their credit card as their emergency fund. Some are doing it by choice, and others are forced to use their credit card when an emergency comes up because they do not have enough money saved.

This is something that scares me because, while credit cards may work for some, I believe that an emergency savings fund is a better solution for the average person. In my mind, whatever emergency fund amount you decide on, it’s better than having nothing set aside at all.

As I stated in the article Everything You Need To Know About Emergency Funds, 26% of Americans have no emergency fund whatsoever.

Also, only 40% of families have enough in savings to cover three months of expenses, with an even lower percentage having the often recommended six months worth of savings.

According to a study by The Pew Charitable Trusts, around 49% of households plan on relying on their credit cards to pay for an emergency. For more about this, just look at the graph below:

People definitely have some ideas for what they would do in case of a financial emergency, but many of the ideas can be disastrous and do a lot more harm, such as relying on a credit card (if you know you won’t be able to pay it off before interest starts to accrue) as well relying on a payday, auto title, or pawnshop loan.

As you can see from the above, there are many options for your emergency fund, and there’s no perfect answer for everyone.

For some people, they may really see the positive on having a credit card emergency fund, but for others, it can lead to a very stressful situation.

Related content:

There are many things you should think about before deciding to use a credit card as your emergency fund.

Is A Credit Card Emergency Fund A Smart Idea?


How’s your financial situation?

Different people need a different emergency fund amount.

Some of the things you will want to think about when determining your emergency fund amount is the stability of your job, your income when compared to your expenses, whether or not you own a house and/or car, your health, and more.

Basically, the “riskier” your situation, the larger your emergency fund should be. If your situation is quite risky, then using a credit card for your emergency fund may be a bad idea. This is because there is a large chance you may rack up credit card debt that you are unable to pay off whenever an emergency arises.

On the other hand, I know a few people who don’t have emergency funds because they save a large percentage of their income each month, and they know that their savings each month could be easily used towards the majority of their financial emergencies.

You’re the best gauge for determining what is a good or risky financial situation, but you need to be realistic and realize that what may work for one person may not necessarily mean that it will work for you.

Related: How Do Credit Cards Work?


Do you mind the risk that comes from credit card emergency funds?

By relying entirely on a credit card emergency fund, you are going to be taking on a lot of risk.

You never know if something may come up, how big the expense may be, and whether or not you will have a large enough credit limit to fund the expense.

Plus, the interest rate on your credit card may hover somewhere near 25%, which can make for an expensive bill if you are unable to pay your credit card balance before interest accrues.


When does using a credit card emergency fund make sense?

Different techniques work for different people. And, that is why personal finance is personal.

There are situations where using a credit card for your emergency savings fund may not be a completely bad idea. If you know that you can pay off a large expense within one month, then using your credit card as an emergency may not be a bad idea, but you still need to be careful before adding any debt.

See, the problem with this thinking is what happens if you lose your job? Many have emergency funds that exist so that they can support themselves if they were to lose their job. What would happen if you relied on credit cards but lost your main source of income?

This could lead to a lot of credit card debt. Unmanageable credit card debt…


Having a “real” emergency fund can be much more worthwhile.

There are many other reasons to have a fully-funded emergency fund:

  • An emergency fund can help you if you lose your job. No matter how stable you think your job is, there is always a chance that something could happen where you may need money fast.
  • An emergency fund is wise if you don’t have great health insurance. Deductibles can be quite high these days, and a good emergency fund can help you if a health crisis were to come up.
  • An emergency fund is a good idea if you have a car. You just never know when it will need a repair or if you will get into an accident.
  • An emergency fund is a need if you own a home. One of the lucky things that homeowners often get to deal with is an unexpected home repair, such as from bad weather.
  • An emergency fund can protect you in many other areas as well. This includes medical expenses for your pets, if you have to take time off work for something, if you suddenly need to travel to visit a sick friend or relative, and so on.
  • An emergency fund is always good to have because it can give you peace of mind if anything costly were to happen in your life. Instead of building onto your stress because of whatever has happened, at least you know you can afford to pay your bills and worry about more important things.

As you can see, there are plenty of positives of having an emergency savings fund. However, I know that different things work for different people and that some prefer to use credit cards in the case of an emergency.


What do I think?

I think the average person should probably have some sort of emergency fund. Even if you can only manage $500 to $1,000 right now, that is better than nothing. $500 to $1,000 may not cover the entire cost of your emergency, but it will at least help you a little bit. Plus, you can still put money towards high-interest rate debt after you build up your specific emergency fund amount.

My problem with using credit cards as your sole source for an emergency fund is that, in some situations, it may lead to more debt. Sure, some people can use their credit cards to their advantage, but the average person most likely needs a real emergency fund that they can count on.

What do you think of credit card emergency funds? Are they a valid idea for the average household?

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Michelle Schroeder-Gardner

Author: Michelle Schroeder-Gardner

Hey! I’m Michelle Schroeder-Gardner and I am the founder of Making Sense of Cents. I’m passionate about all things personal finance, side hustles, making extra money, and online businesses. I have been featured in major publications such as Forbes, CNBC, Time, and Business Insider. Learn more here.

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  1. Mr. Pop

    We use an all-cash emergency fund.

    Credit cards are there, and paid off every month, but if TSHTF, there is a cash to fall back on.

    It’s partyly psychological-it teaches you that it’s a good thing to have a lot of money on the side and not being spent.

  2. DNN

    Happy Monday Michelle,

    Just happen to stop by real quick and wanted to see your new blog. I personally feel people should have a credit card emergency find and here’s why. Things happen on the fly such as a house basement being flooded with water after a heavy storm, medical issues in the moment, or other adverse events where money is needed right then and there. A person may not have available cash on hand to cover complete costs in their bank account at that time and they need credit to get them through the moment. This is why I feel the person needs a credit card emergency fund or a backup credit card they’ve never used with an extensive line of credit. Leslie, a person never knows what may happen. Even if nothing happens at all and everything is fine, I still positively argue a person needs a backup credit card and a secret savings fun just in case. Thank you for thought-provoking post. Keep up the good work my friend! 🙂

  3. Made a typo in the last comment. Where it says Leslie, I meant to say “Lastly.” The smartphone voice recognition app made a typographical error because I forgot to proofread. Enjoy your Monday 🙂

  4. Freedom 40 Plan

    Whether it is an emergency fund or an “opportunity fund” I think cash is always the best option. Credit cards can be useful, and they might help out in an emergency, but if things really go south, it’ll be better to have some money on hand to pay those cc bills in a months time. From the “opportunity fund” perspective, you can’t buy stocks or real estate with a credit card last time I checked…

  5. I would advise relying completely on a credit card for an emergency fund unless it is something that you know you can pay off in full the following month so that no interest accrues.

    For me I do have a savings account but I primarily use that to accumulate funds to take advantage of any investment deals. I don’t have a problem going down to a low balance when the right investment opportunity comes along (primarily syndicated multi-family commercial apartments) because based on my income and low cost of living I can replenish it within a pay period. If something happens in the meantime with a high credit card limit I know that it will bail me out and I will pay it in full before the month’s end.

  6. I totally agree, I won’t advise relying solely on a credit card for your emergency fund. It might lead to more debt down the line and that’s never a good idea. I personally use a high yield savings account and throw a bit of money every month in my emergency fund. This way when the skies turn grey I have something to fall back on and if I really have to then I will touch a credit card but definitely cash first.

  7. Sara @ Budget & Bliss

    Great post Michelle. We have a small emergency fund and will be working toward 3 months of expenses. We have stable jobs and a side income so a smaller fund is okay for our comfort level. Relying on a credit card can be disastrous especially if the emergency is a lay off!

  8. It seems like a multi-month emergency is your big concern. If someone doesn’t think that will happen, then a credit card can work just fine.

    Personally, I’ve seen enough of my friends have financial emergencies. They are always worse and longer than they had planned for. Or, their backup income source fell through at the same time.

    For me, going through an uncertain career change, a cash emergency fund just made sense. If I needed to stretch the money, I could still se a cc as a last resort.

    Thanks for making me think about this topic!

  9. Cash all day, every day for me. I can’t imagine having to rely on a credit card. Maybe it’s because I’m a firm believer of no debt, and a credit card would hinder that, especially if I couldn’t get back on my feet fast enough to pay it off on time. I can see this working for a small handful of people, but I’d rather stick with cash.

  10. Sam

    Relying on credit cards for emergencies can be dangerous because your definition for “emergency” begins to soften.

    You might end up using a credit card when instead you could’ve taken your smaller savings and come up with a more creative solution.

    It takes a very disciplined person to play the credit card game.

    Thanks for the good read Michelle!

  11. I have a new outlook regarding using credit cards. We are working on getting our debt down and have started a cash emergency fund. I have closed most of our credit card accounts and going forward plan to close most of the remainder. It is too hard trying to get them paid off and if use for Emergency Fund it just gets you deeper in debt I think. We have started using a budget system called YNAB that has really helped our family. Love your post!

    1. I agree!! I also love your page! An emergency is bad enough without interest…

  12. My wife and I have a 6 month cash emergency fund set up. We paid off all of our debt and closed the credit cards. I would just hate to compound an emergency with interest… Good post!!

    1. Leon @ Make Save Invest Money

      Me too.
      I agree.

    2. I agree with it too.

  13. Leon @ Make Save Invest Money

    Nothing. Beats. Cash.
    I don’t hold any credit cards I cut them up a couple of years ago, but I do have cash. My wife and I have 6 months worth of expenses in a savings account. This amount of money is much larger than any credit card limit a bank will lend to us. FYI – My credit score is in the 900s purely based on mortgage payments.

    When you have cash, there is no need for credit. Some people make excuses and say they may have an emergency and not have enough saved.
    Well save up now! When you pay with a credit card, you still have to clear the balance or pay a penalty in the form of interest. Why not cut out the middleman and save up as much cash that it matches your credit limit. Then you have no excuse and you can ditch the credit card.
    No millionaire or billionaire got rich from cashback, airline miles and loyalty points. Ever.

    Sorry about the lengthy blog post rant!
    Credit cards really boil my blood. Lol.

    I have seen first-hand, the destruction they cause on people’s lives, like financial cancer.

  14. Kim

    I think that’s pretty sound advice! Credit quickly turns into debt. If you can’t pay it off quickly, then it’s probably not worth it, but some may just not have that cash saved up enough yet and find they have no choice.

    Still, if your plan is to simply rely on credit and to not even try to have cash to fall back on, that doesn’t sound like a good idea.

  15. Max

    Great article! Credit cards can be a valuable tool for cash flow smoothing- effectively offering a zero interest short-term loan by giving up to 60 days before you owe for what you buy. Like you said, there’s no single best way to manage personal finances, but I think syncing lifestyle with available cash flow is step 1 to long-term success.

  16. I totally concur with you Michelle on the fact that it is very important to have an emergency fund stashed away in a savings account for when SHTF.

  17. Alan | Smart Money Journey

    Great article Michelle…

    Using a credit card can be risky for a lot of people because it is too easy to let the balance build. We have enough money in our savings account to cover emergencies, However, I use a credit card to pay for the emergency expense at the time. We receive the credit card’s reward points and can delay actually taking money out of our savings account to pay the expense for up to thirty days.


  18. Interesting post, Michelle. I’m forever suggesting to my clients to save cash (I’m a counselor). I never heard of a credit fund until reading this post. I can see the wisdom in having the card thing available but to me, the cash needs to be ready to pay the bill the moment it comes.

    My worry is that people will rely on the credit card as a defacto emergency fund and not actually put away hard cash. As we’ve all seen, when the economy changes, credit can get squeezed. The end end result? Credit cards can be taken away in a hearbeat (cancelled) by a bank.

  19. My Maverick Money

    Great article. Yeah, the credit card emergency fund has never made sense to me. In fact, it’s always good to save more than you anticipate you’d need.

  20. Jay @ 5to9Living

    I agree that having a real emergency fund is worthwhile, even if it’s a smaller amount that desired it’s something. For us, we rest easier knowing we have enough to cover a few months of necessary expenses in an actual emergency fund account, and that if an emergency ended up requiring more than that, we could lean on credit cards. That peace of mind we get goes a long way toward empowering us for some of our other financial goals and being a bit riskier than we would be otherwise.