Here's Why It Might Be Worth It to Use a Credit Card in an Emergency

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  • Even if you have the money saved, it still stinks to dip into it to cover an emergency or unplanned expense.
  • Credit cards give you the opportunity to earn money back or points on your spending.
  • If you use a newly acquired card with a sign-up bonus, putting an unplanned bill on it can help you reach that bonus sooner.

Here's a way to make lemonade out of lemons.

There's just no getting around it -- life is expensive. If you've ever had an unplanned bill or other financial emergency pop up, you know how stressful it can be to have to shell out a pile of money to take care of it -- and that's assuming you have the money to cover the expense.

A survey last year found that only 40% of Americans had the cash on hand to cover a $400 surprise expense. This isn't ideal, and if you can count yourself among the 60% who do, you may still grumble at having to dip into your emergency fund to pay for an unplanned bill.

There is one way to make paying, say, a car repair bill slightly less terrible, however. Here's why you might consider paying the tab with a good credit card (and then paying off that charge before you're charged interest).

Earn cash back or points

This is really one of the best reasons to use credit cards to pay for your expenses -- the opportunity to earn rewards on your purchases. Whether your top spending category is grocery shopping, gas, dining out, streaming services, or something else, chances are, there's a credit card out there with rewards that will benefit you. And if you like to travel, using your travel credit card to pay for your unexpected bill will mean more points for more free hotel stays, flights, and more.

Improve your credit

Charging regular expenses (or irregular ones, in the case of our unplanned bill) on your credit card and then paying it off on time every month is a good way to build your credit. In fact, whether you're new to credit cards or rebuilding your credit after some missteps, this is one of the easiest things you can do to increase your score. Payment history makes up 35% of your credit score, so the more on-time payments you can make, the better.

It's important to note that it's best to pay off your entire card balance every month to avoid being charged interest and keep your credit utilization ratio low. If the credit card you're using has an introductory 0% APR offer attached to it, you can carry a balance forward for the duration of that 0% period, but I'd caution you to approach this with care. Don't trust that the card issuer's minimum required payments will add up to you paying off the entire balance before you're charged interest -- do the math yourself to figure out your own minimum payments so that balance is $0 before your APR rises from 0%.

Make a sign-up bonus

Finally, if you've just acquired a new credit card when your emergency expense pops up, you have an opportunity to earn a sign-up bonus, if the card offers one. A sign-up bonus is a special offer for new cardholders, wherein if you spend a certain amount on the card within a set period of time (often a few months), you'll be given cash back or points by the card issuer. This can definitely be a way to squeeze a little money back out of your unplanned bill (and possibly even more, if the card you're using is a cash back credit card and you'll earn a small percentage of your money back, too).

If a cost you didn't plan for just landed in your lap, consider putting it on your trusty credit card. While you may not enjoy having to pull money out of your emergency fund or savings account to then pay off the credit card, at least you will have gotten a little lemonade out of a financial lemon.

Our Research Expert

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