Best Credit Card for Emergency Expenses

It’s a scenario we all dread: Life brings an unexpected expense that you just can’t afford to pay for with cash.

What do you do?

Having a credit card on hand for emergencies can ease the burden.

But with exorbitant interest rates lurking on many credit cards, it’s important that you pick the right card to mitigate the impact that interest could have on your finances.

I spoke to money expert Clark Howard on this topic. In this article, we’ll help you identify the right credit card to use for an emergency expense.

This article was updated in June 2023 and I review it every six months. Detailed notes on all updates can be found here.

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The Best Type of Credit Card for Emergency Expenses

If you have an emergency situation that requires more money than you have in savings or your rainy day fund, you may need to turn to a credit card for short-term help.

In emergency circumstances, Clark says you should be looking for a card that offers the lowest fixed-rate APR possible.

“Pay attention only to interest rate when you’re looking for an emergency use card,” Clark says.

In addition to a good rate, you’ll want to make sure the card has no annual fee.

Credit cards with a low interest rate typically don’t have flashy travel or cash back rewards programs. And that’s OK. You don’t need to worry about that in time of financial crisis.

A low interest rate will keep the interest charges on your emergency purchase low, which ultimately will make the total cost of your emergency purchase as cheap as possible.

And knowing you’ve locked in a low rate will enable you to set a plan for paying off your credit card debt as soon as possible. The quicker you pay it off, the cheaper the true cost of the emergency purchase will be.

Where Can I Find One and What Is a Good Interest Rate Target?

Now that you know which type of credit card you need, you may be wondering where the best place is to find one.

Clark recommends checking with a credit union first.

“Most often the cards with the lowest interest rates can be found at credit unions,” Clark says.

There likely are credit unions in your community that have options for local residents to join, but you could also search online for credit unions that offer credit cards. Navy Federal is a large one that offers several quality credit cards, for example.

Once you’ve found a couple of credit unions to shop around, you may be wondering what a good target is for finding a “low” interest rate.

Credit card interest rates are variable, so there’s not one set number we can give you. Clark does have a good rule, though.

“Generally, you’re looking for something that is half of the country’s average credit card interest rate at that time,” Clark says. “They’re variable rates, so it will change.”

At the time of my discussion with Clark, the average credit card interest rate was slightly more than 19%.

He said that, in those conditions, a credit card offering 10% or less on fixed rate APR would be a good target.

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Avoid These 2 Emergency Credit Card Options

If you’re reading this article in a time of emergency, you’re likely stressed by tough decisions caused by the financial hardship and may not be thinking clearly.

So we want to make sure you’re avoiding two types of credit card that may tempt you during this time.

Following our advice on this now may save you hundreds of dollars and countless headaches down the road.

1. Keep Your Rewards Credit Card Away from This Transaction

We do a lot of writing about rewards credit cards at Clark.com. These can be a great way to earn money back on every purchase you make if you pay your credit card bill in full each month to avoid interest charges.

In the case of an emergency, we DO NOT recommend using that type of card to make your purchase.

This type of credit card typically carries some of the highest interest rates on the market. That’s on purpose. They’re luring you in with the promise of rewards in hopes that you’ll run a balance and pay their higher APR.

And since you’re unlikely to have a quick turnaround in paying off your unexpected expense, you could cost yourself hundreds of additional dollars by paying the higher APR on interest charges with your rewards card.

Think of it this way: You could be paying upwards of 26% interest on a rewards card instead of 10% simply because you wanted to chase a reward that was worth 2-5% of your original purchase. That’s a losing decision every time.

2. Avoid the “Same as Cash” or “0% Interest” Offers from the Retailer

If you’re stuck at the car repair shop or are waiting for the HVAC company to replace your heating and cooling unit, you may be tempted to take them up on a promotional offer to make the stress of this expense go away.

DON’T DO IT!

You’re terrifying Clark by even considering it.

Many of these “90 days same as cash” or “6 months of 0% interest” offers that you’ll receive from these businesses have major pitfalls that could cost you a bunch of additional cash.

“Those plans are terrifying because people take them with the intention of paying the purchase off in three or six months, but they usually don’t,” Clark says.

Clark says that’s when the trouble begins.

Typically, when your balance isn’t paid in full by the designated dates on these promotions, you’ll be charged interest on the balance retroactively back to Day 1. That can be a huge blow to your finances.

“People take these ‘Same as Cash’ offers like there are no consequences,” Clark says. “They think ‘Oh, I’m going to do that and not owe any interest.’ But they don’t realize that it’s only a deferral of interest unless you pay off 100% of the balance. And if you needed help coming up with a big sum of money all at once, odds are you’re not going to be able to pay all of that off 90 days later.”

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A Potential Alternative for Those with Good Credit

If you take nothing else away from this article, know that a low, fixed-rate credit card is FAR SUPERIOR to using a rewards card or accepting a 0% offer from a retailer.

But we did want to bring up one alternative option for people with good credit: applying for a credit card that offers 0% APR on new purchases.

These cards, which are different than the 0% interest deferral offers you receive from retailers, typically offer between 12 and 18 months of 0% APR on purchases you make within a certain time period of opening the account.

If you’re in position to apply for a card before making your emergency purchase and your credit score is good enough to receive one, you could save some money on interest this way.

But be warned that interest will start being charged on the remaining balance from your purchase if you do not pay it all off before the promotional APR period expires.

We recommend setting up a plan to make monthly payments towards the balance that ensures it is eliminated prior to interest charges coming due. If you’re successful, this could keep you from owing any interest on your emergency purchase.

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Do you have a successful story from an emergency credit card purchase? Or maybe a warning for others based on a bad experience? We’d love to hear about in the Clark.com community.