Did you know that getting a credit card for emergencies is one of the most common credit card mistakes you can make?
Sadly, I found that out the hard way, leaving me frustrated and discouraged.
Here’s what happened — plus what you can do to avoid falling into the same trap.
(Or to escape that trap quickly and fix things if you’ve already fallen in.)
How it started: Making one of those common credit card mistakes…
Shortly after my first husband and I got married, we got a credit card to use “strictly for emergencies”. We were really clear on that up front, and believed that having the card would also benefit us by building credit. We felt a little bit nervous, but also smart.
The problem was – or so I thought – that we kept having emergencies.
One of us “had” to fly out of state for a funeral. Twice. We also “had” to replace the clutch and the brakes on my lemon of a car. Three or four times!
So of course, we used the emergency credit card to do so. That’s what it was for, right? There was just one huge problem…
The credit card balance grew and grew.
As time went on, it got more and more discouraging to see our credit card balance grow. I’d open the mail and just want to cry. I’d go through the statement, and beat myself up, trying to figure out how I got into that situation.
It seemed like something was always happening to throw everything off. So frustrating! I tried to comfort myself by saying, “Well, but that was an unusual month. Next month will be better.” But it never was.
I hated feeling like that, so kept paying as much as possible toward the card. I wanted to get that thing paid off!
Unfortunately, sending as much as possible toward the credit card left zero wiggle room in the budget. And we didn’t even think of building an emergency fund, which would have made a whole lot more sense given the number of emergencies we’d had.
I don’t think it even occurred to us to start an emergency fund. Which meant, you guessed it, that the next emergency also went on the credit card, since we had no money available to pay cash for the expenses that were always coming up.
Compounding my mistake
I’d also screwed up by not defining what would constitute an emergency ahead of time. By default an “emergency” became anything that felt urgent that we didn’t have the money for. And I didn’t add things to the budget that I absolutely should have. Hindsight is 20/20, right?
For example, if I’d been honest with myself those car repairs wouldn’t have been an emergency. I could have waited to pay for them, even though it would have been a huge inconvenience to find some other way to work. And I absolutely could have created an item in our budget for car repairs, because all cars break down eventually.
Lots of people do that exact same thing, so don’t beat yourself up if you’ve done it too. Make small changes from here on out instead.
The real problem
The real problem was, we weren’t using money to pay for things. We were using debt; debt we couldn’t immediately pay back. (Aka our emergency credit card.) Then when the next emergency came up, we didn’t have the money for that either. Our credit card balance grew, leaving us even less money for expenses. It was a vicious circle.
Pretty soon I got so discouraged at the sight of our balance that it felt like “what’s one more thing, since we’re never going to get it paid off anyway?”
(Very illogical, but who says feelings are logical? And debt certainly isn’t.) So we began adding non-emergency things to the card too. A hunting trip, paint for our condo, a new dress, pizza – you name it.
That vicious circle is exactly why getting a credit card for emergencies is one of the most common credit card mistakes you can make.
Remember this: You don’t need an emergency credit card. You need an emergency FUND.
If I could turn back time, I’d avoid those credit card mistakes.
If we had committed, really committed, to paying off our balance in full every month no matter what instead, we wouldn’t have charged things that we couldn’t afford to pay off that DAY.
If you know that you HAVE to pay for something in its entirety before you buy it, you won’t rationalize to yourself that it’s an “emergency” or that you really “need” it, and so you can just pay for it later.
Instead, you plan for the unexpected expenses that will come up (even if you don’t know exactly what they are) and get creative if need be.
It turns out, we had choices. We just didn’t realize it.
In retrospect, all of the things we’d considered emergencies at the time were things we could have chosen to avoid without suffering any real negative consequences.
For example, we could have missed the funerals and sent a card or flowers instead. Our loved ones would have understood. Or maybe we could have gotten the money to attend some other way, such as by selling things or working to make a little extra. (Check out 101 Ways to Make Extra Money in Your Spare Time if you’re looking for ideas.)
We could have taken the bus, carpooled, gotten rides, fixed the clutch & brakes ourselves or asked my dad — a former MECHANIC — to help, or even sold that lemon of a car instead of just blindly paying for yet another repair that we couldn’t afford. Or maybe we could have figured out that everything mechanical eventually breaks, and started a car repair fund like I mentioned earlier.
We absolutely could have taken a pass on the hunting trip and the new dress, and lived with tiny holes in the walls for a while instead of repainting. We had options.
We could have taken charge, instead of charging it.
If you’re in a similar situation, now is the time to REALIZE something. If you don’t have the money yet, you can’t afford whatever it is yet. Take steps to remedy that situation and prepare for the things that could happen in life.
Most importantly, only spend money you already have. You don’t have to be like the old me: feeling powerless; conveniently blaming the credit cards and their high interest rates. High interest rates suck, but they aren’t the biggest problem. Something else is, and you can find it and get it solved.
Using credit cards for “emergencies” or other things that you can’t afford masks the real problem and stops you from finding the solution.
Take charge of your financial life instead. YOU can do it, without the “help” of a credit card.