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Why you should use a cash back credit card in an emergency


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Normally I would suggest having a no-frills emergency credit card with a low annual percentage rate. You also need a solid emergency fund, of course. But it would seem prudent to have an emergency card as a backup.

Well, these are far from normal times. Many Americans are living on reduced wages or unemployment benefits due to the pandemic. So I’m temporarily adjusting my emergency credit card rules.

If you are going through a financial crisis, consider using a cash back credit card as your official emergency card. In many cases, you’ll get a 0% introductory rate on purchases, which can last anywhere from 12 to 21 months. It’s like getting an interest-free loan for a year or more.

What’s the best cash back credit card?

Just to let you know, there is no definitive answer to this question. The best cash rewards card for you may not be the best card for your neighbor.

To find your best credit card, you need to analyze your spending habits. No, you don’t need to learn Excel. I just want you to go over the items in your budget so that you know where you are spending the most money for most of your life.

Some of the best cash back cards offer a flat rate on rewards. For example, the Unlimited freedom hunt The credit card gives you 1.5% cash back on all purchases. If you don’t want to keep track of categories, this might be a good choice for you.

The Pursue freedom credit card is a little different. You get 5% cash back up to $ 1,500 in categories that change quarterly. Categories include daily expenses, such as gas station and grocery shopping. You get 1% on all other purchases.

Revolving rewards also tend to reflect what consumers are currently interested in. Right now, the Chase Freedom Card offers 5% cash back on groceries, gym memberships, and streaming services, such as Netflix, Hulu, and Disney +. We may not be going to the gym yet, but a lot of us are taking advantage of streaming services right now. You must register online each quarter to get the bonus categories. A little effort is therefore necessary.

With the Wells Fargo Signature Visa Card, you get five points for every dollar spent up to $ 12,500 on gas, groceries, and drugstores for the first six months. If you shop a lot in these categories, you can earn $ 625 in six months ($ 12,500 x 0.05 = $ 625).

There is a cash back card that can help you save money right now. Plus, if you use it for an emergency, you get cash back on the dollar value of your emergency.

Should you pay an annual membership fee?

Well it depends. Lots of people spend huge amounts of money on groceries. Some cook for health reasons, but some are still isolating themselves or trying to save money during the COVID-19 pandemic.

OK, now let’s say you spend manner more than usual. It might be worth getting the Blue Cash Preferred card from American Express, which offers 6% cash back on groceries up to $ 6,000 per year. You just want to make sure the rewards outweigh the cost of the annual fee – $ 95 in the case of this card.

Additional Benefits of Cash Back Credit Cards

Most credit cards that offer cash back offer great signup bonuses. With the Blue Cash Preferred card, you can earn a credit of $ 250 if you spend $ 1,000 in the first three months. Note: The American Express website states that due to the impact of COVID-19, some cardholders will be given an additional three months to earn the bonus. But you need to clarify this when you apply for a credit card.

Use this card for your daily expenses and you won’t have a problem spending $ 1,000 fast enough. You will get rewards on the money spent, plus the $ 250 credit on the statement. Would not it be nice ?

Another benefit of using your “emergency” card frequently is that otherwise issuers could close your account if it is inactive for too long. I have heard from consumers who have recently experienced this. Lenders are worried about giving too much credit right now, so keep that in mind.

A warning for those without good credit scores

If you have awesome credit, you can get a decent APR with a cash back card. However, these cards often have APR ranges. For example, the American Express Blue Cash Everyday card has an APR between 12.99% and 23.99%.

An APR of 12.99% is great, but if you get an APR over 20% you should avoid spending large amounts on this card unless you can pay it off each month or during the launch period of 15 months at 0% APR.

Carrying a balance will lead to debt quickly. For you, I suggest you look into a personal loan if you are having a financial crisis that requires large sums of money quickly. You won’t get a 0% interest rate, but you will likely get a rate greater than 20%.