How to Use a Credit Card for an Emergency Without Drowning In Debt

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You know you're supposed to have an emergency fund to help pay for big, unexpected expenses such as a leaky roof or a busted transmission. But what if you don't have an emergency fund? Or your emergency fund balance is too low? You may need to rely on a credit card instead.

Using credit cards to handle financial emergencies isn't ideal. Credit cards come with high interest rates: If you can't pay back what you've spent on your emergency by the time the bill comes due, your debt will keep growing.

But if you have no other option, here are some tips on lessening the pain when using credit cards to handle life's emergencies. (See also: Where to Find Emergency Funds When You Don't Have an Emergency Fund)

Pay back that emergency spending ASAP

Using a credit card for financial emergencies isn't necessarily a bad thing. Not paying your credit card balance in full each month, however, can really cost you. And you're more likely to not pay that balance off if you've just charged $1,000 or more to handle an unexpected financial crisis.

Blame this on interest. Credit cards come with sky-high interest rates. The average interest rate on credit cards stood at 16.7 percent as of September, according to Bankrate. This means that if you don't pay your balance off in full each month, your credit card debt can grow quickly, especially if that balance is high.

Don't think paying your minimum required monthly payment solves the problem, either. If you have $4,000 in credit card debt at an interest rate of 17 percent, it will take you 144 months to pay it off if you only pay the minimum each month. You will pay more than $3,000 in interest during this time. And that's only if you don't add any more money to your card's balance during this period.

It's so important to do whatever you can to pay off your credit card debt — including debt generated because of financial emergencies — as quickly as you can.

Use the card with the lowest interest rates

If you must charge an emergency on a credit card, use the card with the lowest interest rate. This is especially important when you are charging a large amount that you know you won't be able to pay off in one payment. The math here is simple: The higher your card's interest rate, the faster your unpaid balance will grow. Always use your lowest-rate card for big emergencies.

Create a repayment plan

If you can't repay your emergency charge in one month, you need to come up with a game plan. Determine how much money you can spare each month to cut down on your credit card debt, and apply those extra dollars to it.

Your goal is to pay off your credit card debt as quickly as possible. Maybe you send an extra $100 each month to your mortgage payment. If you have outstanding credit card debt, shift that $100 to your credit card bill instead. Mortgage debt comes with far lower interest rates than debt associated with credit cards. You should always pay off your debt with the highest interest first; it is costing you more, after all. (See also: 5 Ways to Pay Off High Interest Credit Card Debt)

If you have to cut down on other unnecessary expenses — everything from eating out to going to the movies or taking a weekend road trip — do it until you eliminate that credit card debt.

Consider a Balance Transfer

If you've created your repayment plan and feel you can realistically adhere to it, you might be able to pay off the debt even faster and save some money by doing a balance transfer. If your credit is good, you can get approved for a card that offers a 0% Intro APR on balance transfers for up to 21 months. That gives you a good chunk of time to pay off your emergency expenses without paying interest. However, keep in mind that you'd need a card from a different bank than the one you're trying to transfer a balance from, and interest rates on these cards are typically very high, which means that if you don't pay off that balance during the intro period, you'll get stuck with a high interest rate debt and make you worse off than before. Finally, there is usually a balance transfer fee, though there are some cards that offer $0 balance transfer fees.

Build an emergency fund

It's time to build an emergency fund that you can tap to cover unexpected expenses. If you have an emergency fund ready to go, you won't have to worry about putting these expenses on your credit cards again in the future.

Building an emergency fund isn't complicated, it just takes discipline. Start small if you must: Put $100 a month into a savings account. If you can put in more, do it. Your goal is to build an emergency fund that can cover six to 12 months' worth of daily living expenses. That way, you'll be covered if your water heater bursts or your refrigerator conks out. (See also: 6 Fast Ways to Restock an Emergency Fund After an Emergency)

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