Credit card do’s and don’ts for handling urgent financial needs

Emergencies arrive without warning. They can be medical, urgent travel, or unexpected home or vehicle repairs. To resolve such cases, a credit card can provide quick availability of funds if utilised effectively.

Karthik Srinivasan, Chief Business Officer at HDB Financial Services, says,
“In moments of genuine emergency, a credit card can offer immediate access to funds, but consumers must recognise the cost of this convenience. Revolving balances often carry interest rates upwards of 30% a year, which can turn a short-term solution into long-term financial strain.”

“For larger medical, home repair or sudden family expenses, structured credit products with transparent terms and predictable EMIs usually serve customers far better. The focus of consumers should be on responsible borrowing that protects their financial stability during life’s most vulnerable moments,” he added.

What are the common types of emergencies?

Below are some common types of emergencies discussed briefly:

• Medical costs: Sudden hospitalisation, expensive medical procedures, surgeries and tests.
• Travel costs: Last-minute and urgent travel expenses for family emergencies.
• Vehicle repairs: Unforeseen vehicle repair costs due to accidents.
• Home renovation: Fixing electrical problems in homes, leaks, and construction.
• Job losses: Short-term cash gaps resulting from job losses, terminations, or delays in payments.

Why use a credit card in such emergencies?

One can use credit cards in such situations because of the following factors:

1. Credit cards provide instant availability of funds, unlike personal loans.
2. Users can make flexible repayments. This includes EMI conversions for large expenses.
3. Unique emergency benefits are available, including insurance and travel assistance.
4. Credit cards come with exclusive rewards that may offset a small chunk of the total cost.
5. Users can also avail an interest-free period with terms if the costs are fully repaid within the billing cycle.

Do’s

• Spend only on unavoidable and genuine needs.
• Use credit cards with lower interest or EMI options.
• Always repay more than the minimum due. Don’t fall for the minimum due trap.
• Plan your repayment before swiping, and be aware that missing due dates can result in interest accumulation.

Dont’s

• Avoid maxing out your credit limit or making impulsive, emotionally driven purchases.
• Never use emergencies as an excuse to overspend.
• Never skip payments. If possible, set alarms or auto debits to never miss the last dates.

What are the risks of using credit cards?

Credit cards come with several inherent risks, including high interest rates, the possibility of debt accumulation, damage to credit scores if due dates are missed, the risk of overspending, the potential for financial loss due to fraud, exorbitant fees, a negative impact on psychological health, and the threat of legal action in extreme cases.

Hence, it is clear that credit cards can be invaluable during emergencies; still, disciplined repayment and integrity are essential. Credit card users should focus on and work towards building an emergency fund. If in doubt, consult certified advisors before taking on debt or any form of credit.

Disclaimer: MintMoney has a tie-up with fintechs for providing credit. You will need to share your information if you apply. These tie-ups do not influence our editorial content. This article only intends to educate and spread awareness about credit needs like loans, credit cards, and credit scores. MintMoney does not promote or encourage taking credit, as it comes with a set of risks, such as high interest rates, hidden charges, etc. We advise investors to discuss with certified experts before taking any credit.