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: [Read more…]