Life is unpredictable beyond one’s imagination. So, it is prudent to stay well-prepared beforehand for situations that will require immediate funds. Most individuals opt to use credit cards rather than obtaining an emergency loan during financial emergencies. A credit card acts as a safety net, allowing users to meet unforeseen expenses.
The majority of people primarily use credit cards to cover accident-related medical bills, emergency car repair or home repair expenses. Credit cards come to the rescue of people when they do not have enough cash to overcome unexpected financial challenges. These cards have become crucial financial instruments nowadays. Besides offering a host of advantages, credit cards come with risks.
Here are the typical pros and cons you can experience if you use a credit card to cover emergency expenses.
Top Advantages of Using a Credit Card
You will be able to reap the advantages mentioned below if you use credit cards to cover emergency expenses.
Instant and Seamless Access to Funds
The most crucial reason compelling people to use a credit card is getting quick access to funds during financial emergencies. The easy credit accessibility offers much-needed breathing space to a user during a financially difficult period. The working process of credit cards is on the basis of deferred payment, fostering buy now and pay later facility.
Create a Credit History
Repaying the loan on time after obtaining it using the best personal loan app can help improve one’s credit score. You can use your credit card to build your credit history. A good credit score can help you become eligible for a loan at lower interest rates. A potential lender will understand your debt management capacity by checking your credit history and score.
Credit without Interest
You get a grace period or an interest-free timeframe (45-60 days) once you use your credit card. Most banks avoid charging any interest on the credit limit you get. You won’t have to pay any interest if you manage to pay back the entire amount you obtain as credit. Make sure you pay the total amount within the grace period offered.
Exclusive Offers and Rewards
Credit card users can collect substantial rewards after a point in time if they pay off the credited amount. Most credit cards allow you to be a part of reward programs. You get exclusive deals, discounts and offers on your purchases. You can buy your desired items or avail of necessary services at a reduced cost by redeeming the reward points.
Track All Expenses
Tracking all your monthly expenses becomes easier when you use a credit card. You will have clear knowledge of each transaction you do using the card. The statement you receive at the end of the month will give you a clear idea of your spending. Moreover, creating a budget will be hassle-free for you. You will remain knowledgeable about the limit left after using your card to cover certain expenses.
Quick Approvals for Loans
You will qualify for an instant personal loan online if you have a credit card and a good credit score. The approval for your loan application will be faster. Subsequently, you will receive the amount you ask for in your bank account within a few minutes. Ensure your credit history is impressive to secure personal loans without any hassle.
EMI Option
You can opt for the EMI option instead of paying back the full money you use to cover emergency expenses. The equated monthly instalments facility prevents you from experiencing financial instability. The opportunity to pay off the credited money through EMI can help you manage your finances better.
Top-Level Safety and Security
Aside from ensuring unmatched convenience, credit cards offer an additional layer of safety to users. The digitally recorded transactions guarantee top-level security in case of credit card theft, loss or damage. Most banks offering credit cards give additional protection through extended warranties and insurance on card-specific purchases.
Top Reasons to Not Have a Credit Card
Indeed, credit cards function as an instrumental financial tool. On the flip side, irresponsibly using these cards can land you in a significant spiral of debt. It is advisable to avoid using a credit card if you do not want to impact your financial health adversely. Instead, use one of the best loan apps to apply for and obtain a quick personal loan to meet emergency expenses.
High-Interest Rate
Most credit cards have remarkably high APRs. Because of the high interest charged on outstanding balances, a considerable number of credit card users experience financial burdens. So, it is essential to pay the balance within the grace period.
Impacts Credit Score
Forgetting to pay your monthly EMI or making the payment later can affect your credit score to a great extent. You will struggle to secure loans from a lender at low interest rates in the future if you have a notably low credit score. You won’t have such worries if the need to make outstanding payments on your credit card isn’t there.
Risk of Impulse Purchases
The risk of overusing your credit card exists as it allows you to buy anything anytime without cash. Many users step into the trap of impulse purchases and experience a financially stressful situation. One has to be strict and responsible when it comes to using credit cards. You should use it when you need immediate funds. It is advisable not to use a credit card to cover everyday expenses.
Fraudulent Activities
Fraud activities pertinent to credit cards have increased lately. Fraudsters and unethical hackers find one or the other way out to steal users’ credit card details. All precautionary measures banks often take prove futile. Thus, credit cardholders are always at the risk of becoming victims of fraudulent acts.
Wrapping Up
Opt for a credit card only if you know you can use it responsibly. Know that it can prove helpful whenever the need for emergency funds arises. The most informed decision is to make a repayment plan sooner rather than later after using your card to cover emergency expenses. You must prioritise paying off the total amount as quickly as possible.
