Author Topic: 0% interest credit card emergency fund?  (Read 3302 times)

lindsayk

  • 5 O'Clock Shadow
  • *
  • Posts: 31
0% interest credit card emergency fund?
« on: May 15, 2015, 08:49:46 AM »
Wondering if anyone has any thoughts on using a 0% interest credit card as an emergency fund....such as unforeseen vet bills, doctor visits, car repair, etc....and i only mean as a temporary emergency fund while im getting out of debt. I try to keep $500-$1000 in my savings account for these reasons but it always seems to gradually get used for other things because "its there..ill just take $10 out for lunch with a friend type thing"......the credit card i would leave at home and not have with me on a daily basis and would only take it when i was actually going to the vet or going to pick up my car. Thoughts?

frugalnacho

  • Magnum Stache
  • ******
  • Posts: 3347
  • Age: 36
  • Location: Madison Heights, Michigan
Re: 0% interest credit card emergency fund?
« Reply #1 on: May 15, 2015, 08:59:05 AM »
How do you perpetually have a 0% interest card?  I get offers for 0% cc, but it's during times I don't need an emergency fund (or any cc spending) and it's only temporary like 6 months.  You just going to apply for a new card every 6 months and hope you can find an offer and qualify?

JLee

  • Walrus Stache
  • *******
  • Posts: 5602
Re: 0% interest credit card emergency fund?
« Reply #2 on: May 15, 2015, 10:26:28 AM »
Maybe leave your ATM card at home too, or disconnect your savings account from your ATM card.

How do you perpetually have a 0% interest card?  I get offers for 0% cc, but it's during times I don't need an emergency fund (or any cc spending) and it's only temporary like 6 months.  You just going to apply for a new card every 6 months and hope you can find an offer and qualify?

The last one I got was 15 months. There's generally some 0% offer out there somewhere, and a year-ish doesn't seem too uncommon.

I'm a red panda

  • Walrus Stache
  • *******
  • Posts: 8011
  • Location: United States
Re: 0% interest credit card emergency fund?
« Reply #3 on: May 15, 2015, 10:30:53 AM »
I don't see how this prevents you from the small leak spending you described.
What are you going to do with the money that used to be in the savings account to prevent you from spending it? 

What money are you going to use to pay off said interest free credit card? (Since the terms on them tend to be very short.)


This seems to me like a very bad idea.


(And to me $500-$1000 is only a very very small emergency fund.)

Neustache

  • Handlebar Stache
  • *****
  • Posts: 1188
Re: 0% interest credit card emergency fund?
« Reply #4 on: May 15, 2015, 10:38:44 AM »
I'd have to know a whole lot more about you before I answered.

For most people, I'd say no.  That said, I use one for my back up emergency fund, and I have a small savings account (that is in no way linked to my debit card) that covers about two weeks of expenses. 

But....we've been very frugal since about 2007.  I know us. I don't know you.  So for you, I'd say no. 

klystomane

  • Stubble
  • **
  • Posts: 180
Re: 0% interest credit card emergency fund?
« Reply #5 on: May 15, 2015, 10:57:18 AM »
Wondering if anyone has any thoughts on using a 0% interest credit card as an emergency fund....such as unforeseen vet bills, doctor visits, car repair, etc....and i only mean as a temporary emergency fund while im getting out of debt. I try to keep $500-$1000 in my savings account for these reasons but it always seems to gradually get used for other things because "its there..ill just take $10 out for lunch with a friend type thing"......the credit card i would leave at home and not have with me on a daily basis and would only take it when i was actually going to the vet or going to pick up my car. Thoughts?

Isn't one of the points of Mustachianism is to not spend money you can't afford on things you don't need (i.e. being in debt and spending "only" $10 on lunch)? If there's a cheaper alternative (cooking in this case), you don't need to go out.

If you read the hardcore stories floating around, people literally shut themselves out from the world for months at a time just to get out of debt ASAP.

To answer your question, I would say that if you cannot avoid small spending like this, having any kind of a CC is a bad idea...and if you can avoid this kind of small spending, well, then you probably would have no need for the CC.

charis

  • Handlebar Stache
  • *****
  • Posts: 1727
Re: 0% interest credit card emergency fund?
« Reply #6 on: May 15, 2015, 11:01:03 AM »
....such as unforeseen vet bills, doctor visits, car repair, etc....I try to keep $500-$1000 in my savings account for these reasons but it always seems to gradually get used for other things because "its there..ill just take $10 out for lunch with a friend type thing"

If you don't deal with the underlying issue, spending money just because it's there, you should not use a credit card as back up for things that aren't actually emergencies.  That will just dig you a deeper hole.   

I would recommend opening an online savings account with another institution that has no debit card associated with it.  Transfer the money you don't want to spend to this account, immediately when your paycheck gets deposited.  Then pay for the "emergency" when it comes up with a credit card, then pay off the credit card with the money you have saved for this specific purpose.  I don't having a 0% card is particularly useful unless you need to do a balance transfer or an actual emergency (you need to replace your roof, temporary job loss).  Otherwise it's an invitation to spend money you don't have.

Mr. Green

  • Handlebar Stache
  • *****
  • Posts: 1974
  • Age: 36
  • Location: Wilmington, NC
Re: 0% interest credit card emergency fund?
« Reply #7 on: May 15, 2015, 02:32:23 PM »
As far as the 0% deal goes, my wife and I have good credit (770-ish) and we have a perpetual 0% offer on multiple cards. As far as whether the access to credit is the right move for the OP, that I can't say. I can say that it's been my experience that if you find it easy to leak money from a bank account, it's even easier when all you have to do is swipe a piece of plastic.

lindsayk

  • 5 O'Clock Shadow
  • *
  • Posts: 31
Re: 0% interest credit card emergency fund?
« Reply #8 on: May 15, 2015, 09:57:56 PM »
thank you for all the responses. I realize there is more of an underlying issue here with the "spending leak". Im struggling with trying to fix too many habits/problems right now. Curb really bad eating out habit, increase income with photography business I have on the side, which is also my most loved passion so making it an incoming making machine feels overwhelming and stressful and less "for fun/relaxing"........point being...im feeling overwhelmed with what feels like multiple underlying issues i need to take care of. One of my biggest ones is eating out/fast food. Im finding that if i go super cold turkey/mustachian/extreme...i fall off the wagon super fast. Just trying to find a way to have an EF while also trying to kick some bad habits that will ultimately help me get to my goal of FI sooner rather than later...or never. I feel like i make progress with my debt and then i get knocked down.....a few months ago i paid off about $5000 in debt within 1-2 mos with photography jobs (busiest season is fall).....then 1 month later had an emergency vet visit for my dog who is my baby, my car broke down.....that seems to be repetitive pattern...make progress and feel the progress then get nailed with un-forseen expenses. It may or may not be the best idea.......just spinning my wheels trying to get some kind of plan. Guess i should jsut work on taking care of one bad habit at a time...so i should really be on some kind of psychology therapy forum instead of this "people who have their shit together" forum lol

rmendpara

  • Pencil Stache
  • ****
  • Posts: 602
Re: 0% interest credit card emergency fund?
« Reply #9 on: May 16, 2015, 12:47:01 AM »
It's a "behavioral" issue, not a "logical" one.

You're not unable to comprehend reason, but obviously your issue is with your natural tendencies/impulses. Thus, your solution needs to focus on how to help train yourself to resist temptation/impulse purchases.

I've heard one thing to try is to go on a "cash only" diet. Leave your credit card in your wallet and don't touch it. Spend only with cash what you allow yourself budgeted for that week/month. If you find yourself running out, then hopefully you can pinch yourself or something.

Negative reinforcement. It works. Kidding. :)

If your weakness is fast food, then try rewarding yourself with a "once a week fast food treat". Going cold turkey works only for those who are very strong willed. If fast food can overpower you, then you are fairly weak. Not a judgment, just a fact. So, try something different. Give yourself positive reinforcement as well. Set goals, and rewards for attaining those goals. It's like kindergarten all over again...

Good luck!

Indexer

  • Handlebar Stache
  • *****
  • Posts: 1396
Re: 0% interest credit card emergency fund?
« Reply #10 on: May 16, 2015, 12:05:34 PM »
Controlling your spending has already been noted.

Credit card, or Line of credit as an Emergency fund?   No.

I know many people like it, but they forget an important event..... 2008.  In 08&09 as some banks were going under, and others were looking to prevent losses millions of people had their equity lines and credit cards shut down to new spending(even people with 800+ credit scores).   An event like that is also when you are most likely to get laid off, and when your investments will be doing the worst... so the exact moment when you NEED your emergency fund the most.