I have often heard the argument that the credit limit on a credit card serves the purpose of an emergency fund. This strategy by itself is both myopic and dangerous. However, what can make this strategy both farsighted and safe is if you have a real emergency fund with real cash in a savings account backing up your credit card. The credit card gives you the immediacy of funds in an emergency but immediately pushes you into credit card debt which you can now quickly get rid of by using the real cash balance in the savings account. The best of all worlds in my opinion.
What do you think?
Tip Tuesdays is my initiative to share practical personal finance tips â€” every Tuesday. I’d be delighted if you could share a tip or two from your own experiences. Drop a comment to submit your tip. And, as always, do spread the word if you find this useful.