The Dangers Of Relying On Credit Cards - Refresh Financial

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The Dangers Of Relying On Credit Cards

 Relying On Credit Cards

We all know at least one person who has a credit card "for emergencies", and it's definitely an option when it comes to being prepared for the unexpected. So why do financial gurus and top thinkers all push the idea of an emergency fund? Why not use a credit card for unexpected expenses? There are several dangers of relying on credit cards for emergencies. We'll list a few for you so you can see the dangers.

It's not your money

- credit is not your money. You're borrowing it. You wouldn't rely on your parents or your best friend's money for your own emergencies, so why would you rely on a faceless corporation's money plus interest for the same thing?

You pay more than required

- Because you are borrowing what you spend on your credit card, you are charged interest on your balance. That means that whatever your emergency is going to cost you, it will end up being even expensive in the end.

You risk burying yourself in debt

- If you're dealing with your financial emergencies using your credit card, you're turning your emergency into debt. If it's a costly emergency, you could accumulate more debt than you're able to handle in a very short period of time. It could be the first step on a path to financial ruin and the destruction of your own credit. Why risk turning one emergency into another?

It'll be harder to cope if another emergency happens

- Back-to-back emergencies can be a huge obstacle even if you have an emergency savings fund. If you're only relying on your credit card, two emergencies could see you max out your card, destroy your credit and find yourself buried in debt. A savings fund would at least create some sort of buffer in case two emergencies happen fairly close to one another.

With an emergency savings account, you make interest on your balance. If you use a credit card, you pay interest on your balance. By using a credit card for your emergencies, you're choosing to pay extra. It doesn't make much logical sense, does it?

Your credit cards should not be on standby for an emergency. Instead, discipline yourself and save each month until you have substantial savings to cover unexpected expenses. Save your credit card for building your credit history and credit score.

Have you ever relied on a credit card for emergencies? Let us know in the comments!

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