This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

A Credit Card Isn't an Emergency Fund

Many people consider a credit card their emergency fund. While convenient, it's rarely a good idea for most people, especially during times of economic turmoil.

There seem to be two reasons that people opt for the credit card as an emergency fund rather than building a stash of cash in a savings account: the time it takes to raise enough money and the paltry interest earned from a bank account. Here are a number of reasons to reconsider.

Better interest rates: Placing emergency-fund money in an investment that earns a better return than a savings account usually relies on the false assumption that some securities always rise. Stocks and other investments can be volatile, especially in the short term.

Since by definition an emergency occurs unexpectedly, money invested in other financial vehicles might need to be withdrawn at any time. This includes times when it isn't financially in your best interest to do so.

Time factor: There is no doubt that it takes time and discipline to build up an emergency fund. In doing so, you may even need to use a credit card as an interim safety net. But, eventually, you will have saved enough money.

Credit card limits can be reduced: Credit card companies, to reduce risks, are lowering spending limits, even on cards whose owners have good credit. The likelihood of a reduction increases as your financial situation worsens. If you lose your job or fail to make payments on some debt obligations, it's possible your credit card limit will be cut.
1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
AAPL $94.19 -1.04%
FB $118.06 0.54%
GOOG $695.70 0.48%
TSLA $222.56 -4.20%
YHOO $36.00 -0.03%


Chart of I:DJI
DOW 17,651.26 -99.65 -0.56%
S&P 500 2,051.12 -12.25 -0.59%
NASDAQ 4,725.6390 -37.5850 -0.79%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs