Should You Tap Your Emergency Fund to Pay Off a Credit Card Balance?

Credit card debt can be costly. But should you raid your savings to get rid of it?

Maybe you racked up a credit card balance because you got hit with a string of unplanned bills that couldn't be put off, and your paycheck just couldn't handle them. Or maybe you went a little overboard on spending during the holidays (it's happened to the best of us).

No matter why you're stuck with a balance on your credit cards, you may be eager to pay that debt off. The longer you carry it, the more it'll cost you interest-wise.

If you have money sitting in an emergency fund, you may be tempted to take a withdrawal to cover your existing debt, or at least whittle it down. But is that a good idea?

Don't leave yourself without cash reserves

The whole purpose of having an emergency fund is to pay for unanticipated expenses your paycheck can't cover. If you had a home or car repair recently and paid for it with your credit card, there's nothing wrong with tapping your savings to pay for that expense. That's what your emergency fund is there for.

That said, the one thing you don't want to do is leave yourself with little to no money in the bank. If paying off your credit cards means leaving yourself vulnerable like that, then you're better off keeping your savings intact and coming up with a plan to pay off your balance over time.

Say you have a $12,000 emergency fund and $2,000 in credit card debt. If you were to take a $2,000 withdrawal, you'd still have a pretty sizable cushion to fall back on. But if you owe $2,000 in credit card debt and only have $2,500 in savings, you're probably better off not touching your emergency fund.

How to pay off credit card debt quickly

The sooner you get rid of your credit card debt, the sooner you can move on -- and the less that debt will cost you. One option for getting out of debt more quickly is to look at a balance transfer. If you have a decent credit score, you may qualify to move your existing credit card balances onto a new card with a 0% introductory interest rate, making it less expensive to pay off.

If you don't qualify for a balance transfer, you can look at taking out a personal loan, using the proceeds to pay off your credit cards, and then paying that loan off in installments. You might snag a much lower interest rate on a personal loan than what your credit cards will charge you.

Either way, though, you'll need money to pay off those balances. Cutting expenses in your budget could free up some cash, but if you're super eager to shed that debt, you may want to look at getting a second job temporarily. Boosting your earnings could make it possible to not only pay off your debt, but shore up your emergency fund so you're even more prepared for future unplanned bills.

In some cases, tapping emergency savings to pay off a credit card balance makes sense. But if you're going to go that route, make sure to leave yourself with a decent chunk of money left over. And if that's not possible, leave your savings alone and come up with a different plan to get rid of your credit card debt for good.