Are Credit Cards Good for Emergencies? Here's What Dave Ramsey Says

Be careful when falling back on credit cards for unplanned bills.

You never know when a need for money might arise in your world. You could come home from work to find that your air conditioning system isn't working, and that you're looking at $2,000 to get it up and running again. Or, you might lose your job, leaving you with a serious shortfall to pay your bills based on the unemployment benefits you collect.

That's why it's so important to make sure to have a healthy savings account balance. In fact, ideally you should have an emergency fund with enough cash to cover at least three months of essential living expenses.

But many people struggle to build savings and, as such, don't have cash reserves to tap when unplanned bills arise. In those situations, those people are often forced to fall back on credit cards. But if you ask financial guru Dave Ramsey, relying on credit cards for emergencies is a move you might sorely regret.

A dangerous cycle

Any time you carry a balance forward on a credit card, you sign up to pay interest on it. Then, the longer that balance goes unpaid, the more debt you accrue. That could not only cost you money, but also result in a hit to your credit score. And the lower your credit score, the more difficult it becomes to borrow money affordably when you need to.

That's why Ramsey insists that credit cards are a poor fallback option for emergencies. Instead, he says, you should maintain a solid emergency fund so you can dip in as needed and avoid debt.

In fact, you'll often hear that a good reason to get a credit card in the first place is to have a backup plan in case an emergency strikes. Well, that's not a terrible idea. But it also doesn't mean that your credit cards should take the place of an emergency fund.

It's one thing to have emergency savings you deplete, forcing you to then swipe a credit card to cover another unanticipated bill. But it's another thing to say that you'll actively avoid making an effort to build savings because you'll simply turn to your credit cards instead if the need arises. The latter approach could really wreck your finances, and that could lead to a world of stress.

Don't make yourself dependent on credit cards

Dave Ramsey is not a fan of credit cards and thinks consumers shouldn't use them at all. Now the reality is that credit cards can be a useful tool -- one that makes it easy to build credit and get rewarded for everyday purchases.

But Ramsey is right in that credit cards can lead consumers into debt. If you make a point to only use yours for purchases you know you can pay off in full, that shouldn't happen. But if you decide that your credit cards will serve as your emergency fund, and that you won't try to build any savings to protect yourself, then you could end up loaded with costly debt to a very serious degree.