Is your credit card bill an exorbitantly priced umbrella? A lot of people say that the reason they have a credit card is for emergencies. Why not have an emergency fund instead? When a rainy day comes, most people look for a credit card or a payday advance to get them out of trouble. Having an emergency fund and a savings account makes much more sense.
Credit card companies love it when you use them for emergencies even though really, you’re usually using them for: emergency vacations, dire catastrophes requiring a new pair of shoes or that perfect handbag that was on sale.
If you fancy yourself a bargain hunter and at the same time buy with credit and then only make the minimum payment, you’re not understanding how much that sale item really just cost you. The truth is, once you’ve calculated all the interest payments, quite often a $50 purchase amounts to costing you hundreds of dollars over time.
Saving a Rainy Day Fund
Not many people stash money in the cookie jar anymore for emergencies. They think of Visa or MasterCard as their money jar. Instead of using credit cards for emergencies, consider saving a portion of your pay for emergencies and putting it in a high interest bearing bank account. Make the money accessible but not too accessible so that when it rains, you’ll be able to buy an umbrella that doesn’t amount to 28% interest.