Facing financial emergencies when you don’t have the savings to cover your costs can find you scrambling to find credit in a pinch. When this happens it can be overwhelming determining which credit cards offer the best terms for your situation. While credit cards aren’t always the best option for financial emergencies, in some cases they can prove to be a real life saver.
Here we look at the best credit cards for an emergency to help narrow down your search.
Interest rate: 11.9% for purchases, cash advances and balance transfers
Annual fee: $25
The low interest rate is the main attraction for this card, with a rewards program as a bonus. You Earn 2 Points for every $1 on eligible dining or entertainment purchases, and 1 Point for every $1 on all other everyday purchases. The low interest rate makes it easier to pay back the emergency costs and allows you to carry your balance a little longer if necessary, without feeling as much strain with your balance growing. The points are added at 1 point for a dollar and can be redeemed for financial rewards which can help pay down your balance.
Annual fee: $29
If you are in a financial pinch and need to pay off other credit balances, this could be your saving grace. At just 0.99% for balance transfers, as long as you can get a credit limit to cover your costs, you can enjoy six months almost interest-free, and start to pay down your debt more quickly. The following 12.99% is probably much lower than the other interest rates you might be paying as well.
Interest rate: Prime + 4.99% - 8.99% on purchases and cash advances
Annual fee: $0
If you have an excellent credit rating, you probably won’t be able to beat these interest rates. The prime rate has never been so low. There is also no annual fee, and although they don’t offer their own reward program, they do work with Petro-Canada points, so you save 3 cents per litre on gas. You can also link with your Be Well Points at Rexall.
Interest rate: 8.99% on purchases, balance transfers and Access cheques and 24.99% on cash advances
Annual fee: $39
There are a few unique features that make this a good option. First, if this is a balance transfer you have a very low interest rate. Next, if you need to increase emergency funds, they offer Credit Line Increase Decisions during regular business hours which can make it easier to access more money. If you had a cash advance in mind, clearly the interest rate makes this a poor choice. However, it checks off the two most important boxes if you have good credit and want to keep it that way!
What To Look For In An Emergency Credit Card
When seeking a credit card for emergencies, you need to consider how you need to access the credit. For example, as mentioned above if this is a credit emergency where you need to access money to meet your debt commitments, then what you need to look for is a low interest rate for balance transfers such as those offered by Scotiabank and MBNA.
If you are looking at making an emergency purchase, you need to look at the interest rate on purchases, which would bring MBNA to the head of the class. However, you might also benefit from the rewards offered by the HSBC rewards card option. Their interest rate is very reasonable, and you get a point for every $1 spent. If you need to get your hands on more cash, HSBC has the best rates for cash advances.
When To Use Emergency Credit Cards
In a perfect world, you won’t ever need to use an emergency credit card. However, if life throws a wrench in your plans, there are some cases where an emergency credit card is your best resource including:
When you know you can pay off the added balance
If this is a one-off and you know that although you don’t have the money now but are expecting either a paycheque or something like a tax refund in the near future, using an emergency credit card can work well. This is especially appealing if you have some sort of cashback or rewards card where you actually gain from adding to your balance. You might also find a card with an exceptionally low intro interest rate that makes it even more acceptable.
When you have a special intro offer to benefit your emergency needs
If you are facing issues with a high balance and high interest rates and can get a better intro interest rate for your emergency credit card, this can work to your benefit. You can pay down your balances on higher interest cards, then save money by lowering your interest rates. If you think you can get most of the balance paid before the higher interest rate kicks in, this could be the ideal solution. Just be certain you are able to get everything paid during that grace period.
When the interest is lower than other loan options
You might also find a credit card that offers a lower interest rate than other loan options. If you can access the card in a timely enough manner to cover your emergency, you can then pay down the balance more easily due to the lower interest rates. This allows you to pay more towards the “prime”, the money you borrowed, instead of paying too much towards interest that continues to accumulate month after month.
The Bottom Line
If you find yourself in a financial emergency, sometimes a credit card is your best solution. This includes situations where you:
- Can pay off the balance quickly
- Where you might benefit from a rewards or cashback program
- If you have access to either low interest rates or an intro offer with a grace period that suits your payment schedule
However, in situations where you are facing high interest rates and can’t pay the balance off quickly, emergency credit cards aren’t for you. These are the best emergency credit cards, with ideal features to suit most emergency scenarios.