What are the Credit Card Rules You Can Break in an Emergency?

Credit cards can offer a lifeline during crises when unexpected expenses arise. While they come with established rules and regulations, there may be times when you need to bend or break these "rules" to manage emergencies. Responsible credit card usage is crucial, but in genuine emergencies, flexibility is necessary.

In this article, we will explore how you can effectively use your credit card for emergencies, including instances where you may need to deviate from the conventional guidelines while remembering key considerations to protect your financial health.

Credit cards are valuable financial tools, but they come with their own set of rules and guidelines. Nevertheless, there may be situations where you need to break some of the credit card "rules" in an emergency to navigate unexpected financial challenges.

Here are some credit card rules that you may consider breaking in certain emergencies: 

1. Do Not Carry Over a Balance

It is generally a good practice to pay off your credit card balance in full each month to avoid accruing interest charges. However, in a genuine emergency where you do not have enough funds to pay off the balance, carrying over a balance may be necessary to cover essential expenses. While it is important to have a plan to pay off the balance as soon as possible, prioritising immediate financial needs in emergencies may require a temporary balance carry-over.

2. Always Pay More Than the Minimum Due

Paying more than the minimum due on your credit card is recommended to reduce interest charges and pay off the debt faster. However, when facing financial constraints due to an emergency, paying only the minimum due may be a feasible option to manage cash flow. It is vital to understand that paying only the minimum due will result in higher interest charges, and you should aim to pay off the balance as soon as your financial situation improves.

3. You Should Not Use Credit Cards to Pay for Emergencies

It is generally recommended to have an emergency fund in place to cover unexpected expenses instead of relying on credit cards. However, using your credit card to fund emergencies may be unavoidable when you do not have an emergency fund or other financial resources. So, it is important to prioritise your emergency needs, but you must also have a backup plan in place to pay off the credit card debt as soon as possible to avoid long-term financial repercussions.

4. Constantly Be Careful of Your Credit Score

Your ability to get credit in the future is determined by your credit score, which is a crucial financial indicator. However, you might have to put your immediate financial requirements ahead of keeping a flawless credit score in times of need. Although it is essential to be aware of your credit score, using a credit card in an emergency to pay for necessities can have a short-term negative effect. However, you will be able to fix and improve this later.

5. Redeeming Reward Schemes for Maximum Value

Credit card benefits like cash back or travel miles are often designed to be carefully used to get the most out of them. However, in an emergency, you may need to utilise your credit card rewards to balance expenditures or buy needed supplies. Even while it's typically a good idea to optimise your rewards, there may be times when you need to use them right away to get by financially.

Breaking some credit card rules may become necessary in times of need. However, it might have some effects on your credit card, such as the following:

1. Late Payment Fees

Your credit card issuer may impose late payment penalties on you following the terms and circumstances outlined in your agreement if you fail to pay your bill on time or in full. Over the years, these fees may add up and raise the balance on your credit card balance.

2. Interest Charges

Suppose you do not pay the entire outstanding balance on your credit card by the due date. In that case, the lender may charge interest on the remaining balance as per the prevailing interest rate mentioned in your credit card agreement. This can result in additional costs and increase your overall credit card debt.

3. Penalty Charges

Credit card companies in India may levy penalties for various reasons, such as exceeding the credit limit, making cash advances, or transferring balances. So, your overall credit card debt may rise as a result of these expenses, adding to your financial strain.

4. Negative Effect on Credit Score

If you frequently break the credit card rules, such as by skipping payments on your bills, it may negatively affect your credit rating. It may hamper your ability to receive credit in the future, and you may pay more for loans and credit cards if your credit score is poor.

5. Legal Action

Certain credit card companies may file a lawsuit against you if you fail to repay your credit card debt. Legal action may follow, as well as possible financial fines and further legal bills.

The safety of using a credit card during a crisis depends on your financial condition, ability to repay with added penalties and more. However, to make this decision, you can weigh the pros and cons of using a credit card for emergencies only.

Some of the considerations that you must take in having a credit card for emergencies are:

• Quick Access to Funds: One of the most significant advantages of using a credit card in an emergency is that it lets you access funds quickly. You can use your credit card to make any necessary purchase or pay emergency expenses without waiting for approval or processing time.

• Convenience: One can conveniently use credit cards both online and offline. You can use them to pay for emergency medical expenses, car repairs, or other unforeseen expenses without carrying around a large amount of cash.

• Rewards and Benefits: Many credit cards offer rewards, such as cashback, travel points, etc., for additional value when using the card during emergencies. For example, you may earn cash back or travel points using your credit card to pay for emergencies, which can offset some costs.

  The drawbacks of using credit cards during emergencies are as follows:

• High-Interest Rates: One of the biggest drawbacks of using a credit card in an emergency is the potential for high-interest rates. If you carry a balance on your credit card and do not pay it off in full each month, you may be subject to high-interest charges, which can add up quickly and result in debt that is difficult to pay off.

• Impact on Credit Utilisation: High utilisation can negatively impact your credit utilisation ratio. Naturally, it will lower your credit score, affecting your ability to access credit in the future or result in higher interest rates on loans.

• Fees: Credit cards may come with various fees, such as annual, late, and cash advance fees, which can increase the cost of using a credit card in an emergency. These fees can add to the overall expense of using a credit card, and it's important to be aware of them and factor them into your decision.

• Potential for Debt: Using a credit card during an emergency can be tempting, but it can also lead to debt if not managed responsibly. Relying solely on credit cards for emergency expenses can result in accruing high balances that may be difficult to pay off, leading to long-term financial consequences.

• Overspending: The ease of credit card usage in an emergency can lead to overspending. So, when you face an urgent situation, you may automatically depend on it without fully considering the financial implications and accumulate more debt than necessary.

  In essence, credit cards for emergencies can be a useful tool for quickly accessing finances when unanticipated challenges occur. While it is important to follow credit card rules and regulations, there may be times when they could be broken. 

  To avoid negative outcomes, approach emergency credit card use with prudence and a strong plan. Communicating with creditors, looking into alternate types of aid, and prioritising repayment can all help to ensure that using a credit card for an emergency does not lead to long-term financial problems.