Rewards credit cards
In some cases, having an emergency fund doesn’t always negate the need – or usefulness – of an emergency credit card. Credit cards are much more practical in an emergency than trying to withdraw money from a savings account. If you already have an emergency fund and just want a credit card on hand for peace of mind, a rewards credit card may be a good option.
READ MORE: Best credit cards with rewards
Since emergencies are rarely inexpensive, any means of recovering a little can be worthwhile. For example, some of the best cash back cards offer 2% cash back on purchases. It might lessen the impact of an expensive car repair or an unexpected medical bill a bit.
You can also find rewards cards with additional benefits that can come in handy in an emergency. A credit card concierge can help you find important services, like auto repair shops, when you’re away from home. You can also take advantage of your existing points or miles to save money on last-minute trips or car rentals.
RELATED: How do credit card points work?
Medical credit cards
You can find a few credit cards specifically designed to help people pay for their medical bills. These cards often have low interest rates and no annual fees. Some may even have special financing offers that allow you to make payments over time. Just watch out for deferred interest (see deferred interest section below).
READ MORE: Best Medical Credit Cards
Some medical credit cards will require you to have good credit. However, others may have more flexible credit requirements. This can make them useful alternatives for people with fair or even bad credit.
READ MORE: Credit cards for bad credit
Keep in mind that medical credit cards are generally only usable for medical expenses. This makes them of limited use as general emergency credit cards. You may also want to explore low interest credit cards as a versatile alternative.
READ MORE: Best Low Interest Credit Cards
Things to consider when using a credit card in an emergency
Credit cards are handy in an emergency, but they are not without drawbacks. Here are some things to consider before using your credit card to fund emergency expenses.
Your credit limit
Your card’s credit limit is a big concern when you’re covering big emergency bills. On the one hand, you must ask yourself if the credit limit of your card is sufficient for current expenses. Although some high limit credit cards may have limits of $10,000 or more, these are the exception and not the rule.
LEARN MORE: What happens if you go over your credit limit?
Not only can going over your credit limit cause problems, but even getting close your limit can have negative consequences. In effect, this will increase your credit utilization rate. This is the ratio of your credit card balance to available credit. A high usage rate can cause your credit score to drop. In some cases, this may even cause your issuer to reduce your credit limit.
LEARN MORE: What is a credit utilization ratio?
If you need a higher credit card limit, you may have options. For example, you can request a higher credit limit from your issuer. This may require a credit check and meeting basic credit history and income requirements.
LEARN MORE: How to increase your credit limit
While we’ve talked about the benefits of introductory APR offers above, there is another type of zero rate offer you may come across: deferred interest offers. Although they may seem similar at first glance, financing offers that use deferred interest can be expensive if you’re not careful.
LEARN MORE: What is deferred interest?
With a regular introductory APR offer, you are not charged interest for the duration of the introductory period. Once that ends, your remaining balance starts earning interest at the standard rate.
LEARN MORE: How does credit card interest work?