3 Times It Pays to Use a Credit Card for Emergencies

In some cases, using a credit card for unplanned bills makes sense.

Credit cards can make shopping convenient. You don't have to worry about carrying enough cash with you to cover your purchases, and you can rack up rewards points for the things you're already buying. Credit cards can also come in handy when an unplanned expense strikes. Here are three situations where it pays to use a credit card to cover an emergency.

1. You have no emergency fund

As a general rule, it's a good idea to have enough money in an emergency fund to cover three to six months of essential living costs. That way, if an unforeseen bill comes your way, like a car or home repair, or if you're unemployed for a period of time, you'll have money to fall back on and you won't immediately have to resort to debt.

When financial emergencies strike, the optimal thing to do is to dip into your savings. But if you don't have an emergency fund, then that's not an option. And in that case, it could be worth it to charge whatever your unplanned bill is on a credit card.

2. Your credit score just took a hit

There are several reasons why your credit score may have recently dropped. For example, if you're 90 days late or more on even a single bill, your score could plummet.

Now normally, if you encounter an unplanned expense and don't have the money in savings to cover it, applying for a personal loan can be a good backup plan, since generally, you'll pay less interest on a personal loan than what a credit card will charge you. But if your credit score recently took a hit, you may not qualify for a good rate on a personal loan. Or, you may not qualify for a loan at all. And in that case, falling back on a credit card makes sense.

3. You have a 0% intro APR card

The problem with charging emergency expenses on a credit card is that you'll frequently get stuck paying a lot of interest in the process. But say you get a 0% APR credit card (one where you don't have to pay interest for a set period of time, often several months or even more than a year). Using that card to cover your unplanned bill could be a smart move -- that is, if you're convinced you'll be able to pay off your balance quickly.

If you pay off your balance before your 0% introductory period comes to an end, you'll avoid costly interest on the bill in question. But if you don't manage to do that, you could be hit with a very high interest rate.

Surprise expenses can creep up at any time, and they can deal a major blow to your finances. While using your savings to cover them is generally the most ideal way to go, if that's not an option, and you're not in a great position to apply for a loan, then turning to your credit cards makes sense. Just do your best to pay off that debt as quickly as you can so it costs you as little as possible.