I haven't had a credit card in six years. That's right, six years. And yes, I've been able to rent a car, get a hotel and even buy a house.
This comes as a shock to my contemporaries. And the question I get most often is "well, what about emergencies?" I cringe at this question.
Here is my short answer: Credit cards are not emergency funds.
Let me explain.
Last week I got this question on my YouTube channel and I thought it was a great one:
"If you have an emergency fund of $1,000 and a credit card balance of $1,000 would you pay the credit card off with the money from the emergency fund?"
Now I just want to remind you that I am a lady that gives you frugal living advice, not a financial advisor. But since you asked...
No. No I would not pay off my credit card bill using my emergency fund. Why? Because credit card bills are not an emergency.
Now, if you're behind on your bill and you need to get current, then yes. I would use some of my emergency fund to pay the bill. But I would try not to deplete that account.
Here is my reasoning: As soon as you use up that money to pay off your credit card bill, an actual emergency will arise.
You will get a flat tire, someone will have to go to the hospital for a test and your AC will go out. (Things that happened to our family within the course of one month.)
Without an emergency fund you will reach for that credit card and perpetuate a cycle of debt.
The goal here is to get yourself out of debt not further and further into it. And the even bigger goal is to break your dependency on credit cards.
If you don't have the money for an emergency like a new tire or a emergency room visit, how on earth will you have the money to pay your credit card bill when it arrives?
Now, I just want to say that I don't think credit cards are evil. In fact, I know a lot of people that use them and pay them off every single month.
But the truth is the majority of credit car holders in the U.S. do NOT pay off their cards every month. In fact, on average, credit card holders carry $15,000 in credit card debt. (Source)
What about you? What think about using your emergency fund to pay off your credit card balance?