Unplanned expenses like medical emergencies, urgent home repairs, spontaneous travel plans, and last-minute wedding costs can disrupt your budget. In such situations, a credit card can serve as a valuable financial tool by providing immediate access to funds.
Credit cards offer instant credit, helping you manage emergencies without depleting your savings. Here’s how to use your credit card wisely to handle unplanned costs without falling into debt.
Credit cards are not just for shopping. They can help you manage various types of expenses with great benefits such as cashback, rewards, and flexible repayment options. Here are some common types of expenses you can manage with a credit card:
You can use your credit card for daily needs like groceries, fuel, and dining. Many cards offer cashback or reward points on these regular spends, which helps you save money over time.
Credit cards make it easy to pay for utilities like electricity, water, mobile, and broadband internet. You can even automate these payments to ensure you never miss a due date.
In case of a sudden medical issue, car breakdown, or urgent travel, credit cards give you instant access to credit. This helps you manage the cost without touching your savings.
Credit cards are useful for booking flights, hotels, or rental services. Enjoy travel perks like free lounge access, milestone bonuses, and discounts on bookings.
Use your card to shop online or pay for services like Netflix, Amazon, or Spotify. It adds security to your transactions and may offer EMI or cashback options.
Some credit cards let you pay for coaching classes, skill courses, or certifications. You can even convert large payments into EMIs to reduce financial pressure.
Apps like Uber, Rapido and Ola allow you to link your credit card for smooth and cashless rides. This makes booking faster and also helps track your travel expenses.
If you make a large purchase or can't pay the full bill, credit cards allow you to convert the amount into EMIs. This makes repayment easier and more flexible.
Whether you're buying a sofa, fridge, or television, credit cards help you make big purchases. You can turn these bills into monthly EMIs to avoid a one-time cost.
Unplanned expenses can arise suddenly and disrupt your financial stability. These may include medical emergencies, car breakdowns, traffic challans, or urgent home repairs. Credit cards can be a helpful financial tool in such situations, but only if used wisely.
They offer several advantages such as:
However, relying on credit cards during emergencies also has drawbacks:
Here’s how you can use your credit cards wisely in emergencies
Set aside one credit card just for emergencies to avoid using it for everyday spending. This ensures you have a credit limit ready for when you really need it.
Understand the interest rate, credit limit, and fees, like for cash advances or late payments, before relying on your card.
Try to repay the full amount as soon as possible to avoid high interest charges and keep your credit healthy.
If the emergency expense is large, consider converting it into EMIs. This makes repayment easier and helps you avoid a financial burden all at once.
Using cards for the wrong types of expenses can lead to high-interest debt, extra fees, and a drop in your credit score. To protect your finances, it is crucial to understand key credit card limitations. Here are some expenses you should avoid putting on your credit card:
Using a credit card to withdraw cash from an ATM may seem handy during emergencies, but it comes at a high cost. Most banks charge a steep fee plus immediate interest without any grace period.
Using a credit card to pay rent or mortgage can incur extra processing fees. Large recurring payments can increase your credit utilisation ratio, which can lower your credit score.
You can pay taxes using a credit card, but it's not a wise choice. The payment typically comes with a fee, which adds to your cost without any meaningful reward benefit.
Using credit cards for online betting or casino games is risky. Many issuers treat gambling transactions as cash advances, which means high fees, zero rewards, and a quick route to debt.
Charging high-cost items to your card without a solid repayment plan can trap you in long-term debt. Even with EMI options, interest rates can be high, making the purchase more expensive over time.
Unexpected hospital bills can be overwhelming, and putting them on a credit card can worsen the financial pressure. If repayment isn’t prompt, interest will pile up. Explore insurance claims, emergency funds, or lower-interest loans as alternatives.
Besides shopping, what other types of expenses can I use my credit card for?
You can use them for paying utility bills (electricity, water, etc.), educational courses to upskill, and big-ticket items for your home, like a new AC. Many cards offer EMI options to break down those larger expenses into manageable monthly payments.
How can a credit card help me handle unexpected costs in India without getting into debt?
Unplanned expenses like medical emergencies, car repairs, or urgent home renovations can throw off your budget. A credit card can provide instant access to funds in these situations. Try to repay the full amount by the due date to avoid high interest charges. If it's a large amount, convert it into EMIs for easier repayment. Consider keeping one card specifically for emergencies and knowing its terms.
Are there any types of expenses I should absolutely avoid putting on my credit card in India, even in an emergency?
Avoid using your credit card for cash advances from ATMs – the fees and interest are usually very high. Also, paying rent or mortgage with a credit card often incurs extra charges, and using it for online betting or gambling is a huge risk that can lead to debt quickly. And, think twice before putting large medical expenses on a credit card without exploring other options like insurance first.
