Q: I’ve used cash and debit cards for all purchases since I want to avoid debt as much as possible. But, I know that there are times when a credit card could come in handy, particularly in emergencies. If I do sign up for a credit card, how do I determine when to use it for an emergency?– Kyle W.
A: It’s natural for us to create excuses for ourselves and to misconstrue what constitutes an “emergency.” Such behavior is common among college students, who are constantly faced with spontaneous spending opportunities. But, anyone can get that urge to spend when they know they shouldn’t. The fear of “missing out” often explains why some consumers are too lenient with their spending.
Pair that tendency with credit cards and there’s a recipe for financial disaster.
Because of a lack of a clear-cut definition for an emergency, there will never be an easy way to identify the urgent situations that justify the use of a credit card. However, here are some examples to help you determine whether or not you should pull out the credit card for an “emergency”:
– Breakdown of major tools and appliances. Some things are just too important to your daily life that you simply cannot wait to replace them. When your refrigerator or water heater no longer works, it would make sense to pull out the credit card for a new replacement. Other appliances such as a microwave don’t fall under this category because there are other means to do what that these machines can do, such as using the stove or oven.
– Traveling and stranded. Your car may fail on you during a road trip or unexpected weather could have led to a canceled flight. In such cases, using your credit card to ensure your safety and well-being is appropriate.
– Urgent medical attention. Your health comes before all else. Instances such as a sudden illness or broken tooth will require immediate medical attention. Without proof of health coverage, you may have to front the costs of medical care and receive a reimbursement later (if you show that you have health insurance).
There are an infinite number of situations that should not be considered emergencies, including impulsive purchases during “limited time” sales or a trip for which you haven’t saved enough.
Essentially, any situation that doesn’t pose a threat to anyone’s health or well-being would not require the use of an emergency credit card.