Summary

When times are good, credit card rules like paying off balances in full and keeping utilization low are solid advice. However, in a financial emergency, strict adherence to these rules may not be practical or even advisable. Credit cards can provide much-needed flexibility to navigate difficult situations. Here are seven credit card “rules” you might need to break during tough times.

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💳 'Never carry a balance month to month'

In normal circumstances, avoiding credit card debt is a wise financial move due to high-interest rates. However, in a crisis, carrying a balance may be necessary to preserve cash for essential expenses. While interest charges can add up, the cost may be worth it if it helps cover necessities like food and housing. If needed, consider reaching out to your credit card issuer to request lower interest rates or deferred payments.

Takeaways:

• Paying interest is not ideal, but in emergencies, it may be unavoidable.

• Carrying a balance for a short period can provide financial flexibility.

• Contact your credit card issuer to request a lower rate or payment relief.

Key Terms

• Credit Card APR: The annual percentage rate, or interest, charged on unpaid balances.

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📉 'Pay more than the minimum amount due'

Typically, paying only the minimum due prolongs debt and increases interest costs. However, in an emergency, keeping up with minimum payments ensures your account stays in good standing, preventing late fees and penalty APRs. While it’s not a long-term strategy, temporarily making minimum payments can help allocate funds toward critical expenses like rent and utilities.

Takeaways:

• Paying only the minimum due keeps your account active and avoids penalties.

• This strategy should be used only as a short-term solution.

• Once finances stabilize, prioritize paying down debt.

Key Terms

• Minimum Payment: The lowest amount required to keep your credit card account in good standing.

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📊 'Keep your credit utilization under 30%'

Credit utilization affects credit scores, and keeping it low is a best practice. However, in an emergency, using more of your available credit may be necessary. While high utilization can lower your credit score temporarily, the impact isn’t as severe as a missed payment. Once financial stability returns, lowering utilization will help restore your score.

Takeaways:

• High credit utilization can lower your score but is not permanent.

• It is better to use available credit than to miss essential payments.

• Your credit score will recover once your utilization decreases.

Key Terms

• Credit Utilization: The percentage of available credit that is currently being used.

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🎁 'Redeem rewards for maximum value'

Maximizing credit card rewards is smart under normal conditions, but during a financial crisis, redeeming points for cash—even at a lower value—can help cover immediate needs. Having cash in hand can be more valuable than holding on to travel rewards for future use.

Takeaways:

• Use rewards for cash if it helps meet essential expenses.

• Getting lower value for your points is worth it if it helps you financially.

• Consider using cash-back rewards cards during tough times.

Key Terms

• Redemption Value: The worth of points or miles when converted to cash or other rewards.

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🆘 'Credit cards aren't an emergency fund'

Ideally, an emergency fund should cover unexpected expenses, but not everyone has savings available. If no other options exist, using a credit card can provide temporary relief. While this isn’t a perfect solution, it can be preferable to payday loans or other high-cost borrowing options.

Takeaways:

• Credit cards can serve as a last-resort emergency fund.

• Interest rates are high, but they are often better than payday loans.

• Once stable, prioritize paying down the balance as quickly as possible.

Key Terms

• Emergency Fund: Savings set aside for unexpected financial hardships.

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⏳ 'Don't just park debt at 0% — pay it off'

Balance transfer cards with 0% APR offers can be useful in emergencies. Typically, it’s best to pay off transferred debt before the promotional period ends. However, if money is tight, making only the minimum payment can provide short-term relief. Just be mindful of when interest rates will kick in.

Takeaways:

• Using a 0% APR balance transfer can help delay interest charges.

• Paying only the minimum due may be necessary in a crisis.

• Plan to pay off the debt before the promotional period expires.

Key Terms

• Balance Transfer: Moving debt from one credit card to another with a lower interest rate.

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📉 'Don’t hurt your credit score'

Credit scores are important, but they should not take priority over basic needs in an emergency. If financial survival requires temporarily damaging your credit score—such as using a high percentage of credit or missing a payment—it is a risk worth taking. Your score can always be rebuilt later.

Takeaways:

• Your credit score is a tool, not a goal.

• Temporary hits to your credit are recoverable.

• Prioritize financial stability over preserving a perfect credit score.

Key Terms

• Credit Score: A numerical representation of your creditworthiness based on your financial history.

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Conclusion

Following traditional credit card advice is wise in stable times, but emergencies require flexibility. Breaking certain rules—like carrying a balance or using credit for essential expenses—can help you weather financial storms. When stability returns, you can focus on repairing any financial damage and regaining control over your credit.