Credit cards can be an invaluable lifeline during financial emergencies. Whether you simply need extra funds to see you through your next paycheck or you’re faced with a sudden large expense such as medical bills, you can use your card to either shoulder your purchases in the meantime or to get money directly from it through a credit card cash advance.
That being said, heightened emotions during emergencies can easily cause misuse of credit cards, which can lead to more troubles later on. It is then important to know how to use your credit card wisely during emergencies so you can stay focused on getting yourself out of your current financial situation. Here are some dos and don’ts to keep in mind when using credit cards during a financial emergency.
Dos of Using Your Credit Card in Financial Emergencies
1. Do Be Aware of Your Credit Limit
When you’re lacking funds, it can be tempting to put all the expenses on your credit card so you wouldn’t have to worry about paying them right away. However, this can lead to maxing out your limits. Having a maxed-out credit card can make it harder for you to repay your balances on time, and it can also result in higher interest charges if you’re unable to pay it off.
Thus, make sure you’re well aware of your credit limit before you use your card for emergencies. This goes double for cash advance limits, as a cash advance tends to accrue an even higher interest than regular credit card transactions. By keeping your credit card debt within limits, you’re also making it easier to pay your balance eventually.
2. Do Leverage Your Credit Card Rewards
Check if your credit card has rewards you can use to help with some of your expenses. Vouchers redeemed using card points or cashback rewards can save you money on essential expenses, which can be useful to tide you over during tumultuous financial situations.
Something like the Landers Cashback Everywhere Credit Card from Maya, for instance, can help lighten your budgeting burdens as it lets you enjoy up to 5% cashback at Landers Superstores, 2% cashback on dining, and 1% cashback on other qualified spends.* You can conveniently redeem your cashback rewards the next time you shop for essentials at Landers. This then makes grocery shopping less of a worry, so you can instead focus your finances on other emergency expenses.
3. Do Consider Flexible Payment Plans
In emergency cases where you have to shell out a large amount of money, check with your credit card provider if you can avail yourself of a flexible payment plan for it. Many credit cards offer installment plans for a minimal or even 0% interest rate. Take advantage of flexible payment plans to spread your expenses over several months, thus letting you steadily recover financially as well.
4. Do Plan a Repayment Strategy
Another must for using your credit card during financial crises is to make sure you’ve got a repayment plan in mind. This should include a schedule that will allow you to pay the balance as soon as possible so that interest charges won’t overwhelm you over time. Make sure to never miss payment deadlines and, if possible, try to pay more than just the minimum balance each month—and best if you can pay in full. This helps reduce your debt faster and prevent it from snowballing into a larger one due to interest charges.
Don’ts of Using Your Credit Card in Financial Emergencies
1. Don’t Skip Over Your Credit Card Terms
Even if you’re in a financial pinch, don’t skip reading your credit card’s terms and conditions before you use it. Having a clear understanding of the interest rates and transaction fees that come with your card lets you better plan ahead how to use it responsibly and prevent unpleasant surprises once your credit card bill arrives.
2. Don’t Use Cash Advance Frequently
Unlike regular credit card transactions wherein interest charges only start when you miss paying your minimum balance, cash advance accrues interest the moment you withdraw the money. Hence, reserve the use of cash advances for dire emergencies only. At the very least, don’t max out your cash advance limit to keep interest charges at a minimum.
3. Don’t Borrow More Than You Need
As it dawns on you that you can just use your credit card in the meantime during a financial crisis, you may be tempted to borrow more than you need. Resist this temptation by making a list of actual emergency expenses and keep your credit card purchases or cash advance expenses limited to those only.
To exercise better control of your finances, utilize your card’s spending limits. If you’re a Maya credit card user, then you can simply use your Maya app to set daily spending limits and even block certain transactions, such as online payments or cash advances, to tighten up your finances.
4. Don’t Forget to Explore Other Financial Alternatives
Rather than putting the entirety of your financial emergency expenses on your credit card, try to explore other financing options as well. For instance, you may borrow half of the emergency funding needed from family and friends to keep your credit card debt much lower. This also makes it easier for you to pay your credit card bills down the line as you’ve kept the debt to a reasonable level.
Having a credit card is indeed a great help during any financial crisis, but you should also be reasonable and strategic in its use so that it won’t cause further financial troubles for you later. To that end, just keep in mind the dos and don’ts discussed above to make sure you’re using your credit card responsibly even as emergencies arise.
*Transactions that don’t qualify include: cash in, cash advance, quasi cash purchases, casinos and gambling, fuel, supermarket, pharmaceuticals, utilities, telco, and government.
