When I was unemployed, I used a low-interest credit card to preserve my emergency savings — and I have no regrets

AJ_Watt/Getty ImagesAuthor not pictured.
  • When I found myself unemployed two years ago, I chose to carry a balance on my credit card rather than dip into my $US2,000 emergency fund.
  • I chose to rely mainly on my low-interest credit card to make ends meet because I didn’t want to break my newfound savings habit, and I wanted to maintain access to cash.
  • Luckily, I qualified for a balance transfer that allowed me to pay off the balance I accumulated interest-free.
  • See Business Insider’s list of the best credit cards with intro APR offers.

When I found myself unemployed a few years ago, I’d barely started an emergency fund. In fact, I wasn’t even calling it an emergency fund. It was just $US2,000 that I had in a savings account. This wasn’t enough to be considered a full-on emergency fund, which should contain at least six months of basic living expenses, but it was enough to cover a broad range of unexpected expenses.

During this period of unemployment, I could’ve tapped into that savings account to cover my living expenses. Instead, I decided to put them on my credit card, for a few reasons.

I didn’t want to break the savings habit I’d finally built

It took me years to build a habit of putting money away into a savings account each month, and even longer to finally stop tapping into that savings account for every whim that came along.

I knew that if I allowed myself to spend that money so early on in building a new habit, I might lose all the progress I made. I’d risk going back to blowing my savings account on things I wanted rather than things I needed.

While using my credit card instead would result in interest fees, paying them was worth it to me if it meant strengthening this newfound financial habit.

The thought of having no emergency cash on hand worried me

While you can pay for most things with a credit card nowadays, there are still some expenses that are tricky to cover without cash. This was especially true for me, as I was abroad during my period of unemployment. I didn’t like the idea of draining my savings account even if I did have a credit card that I could rely on, because I worried about needing to access cash in an emergency.

There’s also the possibility that I could have emptied my savings account, run up a balance on my credit card, and then not have had any money to make the minimum required payment on my credit card each month. Missing credit card payments is one of the worst things you can do to your credit score.

Generally speaking, it can be wise to keep a little cash on hand while you’re paying off high-interest debt. I probably didn’t need to keep all $US2,000 – keeping just $US500 or $US1,000 in an emergency fund and funelling the rest toward high-interest debt might make more sense for many.

I had a low-interest credit card – and a balance transfer offer

The credit card I was using at the time was the Choice Rewards credit card from First Tech Federal Credit Union, which has a relatively low interest rate.

If I’d been facing a 20% APR, I would have avoided using my credit card at all costs. Luckily, my credit card had an APR of about 12%. While that still isn’t cheap, it meant that running up a balance of $US1,000 or so wasn’t going to result in crippling interest charges.

At the time, I had a credit score of 780 and was confident that I could qualify for a balance transfer credit card. These credit cards come with a 0% introductory APR on balance transfers, meaning I could transfer any balance I racked up on my credit card to one of these balance transfer cards and pay off my debt without spending any money on interest, as long as I paid off the balance in full before the introductory period ended.

Once I found work again and was done using my credit card, I opened the Chase Slate and did a balance transfer. This card gave me 15 months to pay off my balance interest-free and also didn’t charge a balance transfer fee. (Note that the Chase Slate currently isn’t open to new applicants; many lenders are tightening their approval standards due to the economic impact of the coronavirus.)

Deciding whether to drain your savings account or whip out your credit card in times of need isn’t easy, and the right choice depends on your own financial habits and needs. For me, the right choice was to leave a portion of my savings intact while relying on low-interest and 0% intro APR credit cards to cover my expenses.

Credit cards with intro APR offers

With many lenders tightening their approval standards in light of the coronavirus pandemic, it could be challenging to get approved for a credit card with an intro APR offer now – especially if you lost your source of income. It could make sense to apply for one of these cards when you have a stable source of income, to provide yourself a safety net for the future.

Also remember that once the introductory offer period ends, you’ll start incurring interest charges with these cards – so it’s not necessarily a great strategy if you don’t think you’ll be in a better financial situation in several months.

  • Longest intro APR offer: Citi Simplicity® Card
  • Best for earning cash back: Citi® Double Cash Card
  • Best for maximizing Chase points: Chase Freedom Unlimited®
  • Best for maximum cash back, if you work for it: Chase Freedom®
  • Best for popular spending categories: Blue Cash Everyday® Card from American Express
  • Strong cash back with no bonus categories: Capital One® Quicksilver® Cash Rewards Credit Card
  • Strong cash back on dining: Capital One® SavorOne® Cash Rewards Credit Card

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