How To Use Credit Cards to Grow Your Emergency Fund

Posted on Friday, August 11th, 2023 | By IndusInd Bank

Emergencies are unpredictable and can cause a financial dent if you’re unprepared. Sudden mishappenings, like a medical emergency, car breakdown or malfunctioning home appliance can happen at any time. But, did you know your credit card can be a useful tool for this? From using reward points to taking advantage of an interest-free period, let’s understand how to utilise credit cards to grow your emergency fund.

Understanding the importance of an emergency fund

An emergency fund is often referred to as a financial safety net, and for a good reason. It serves as a buffer against life’s unforeseen and unexpected events – those that are beyond your control, yet have a direct impact on your financial health. Such emergencies could range from a sudden job loss, a major health issue, or unanticipated home or car repairs.  

Here’s why an emergency fund is crucial for financial stability:

• Financial security: Having an emergency fund gives you peace of mind, knowing that you can handle sudden financial shocks. It provides a safety cushion that allows you to cover unexpected expenses without the need to take on high-interest debt.
• Protection of investments: If an unexpected financial emergency arises, you may be forced to liquidate your investments at an inopportune time, possibly even making a loss. An emergency fund protects your investments by providing an alternative source of funds.
• Career flexibility: An emergency fund can provide the financial security needed to take calculated career risks. It might be the difference between staying in a job you’re not satisfied with and taking the plunge into a new career or starting your own business.

The power of credit cards during emergencies

Credit cards can be a financial lifesaver during emergencies, offering immediate liquidity when you need it the most. Let’s explore the various ways in which you can utilise your credit card for emergency situations:

• Medical expenses: Medical emergencies are unforeseen and often come with hefty expenses. Your credit card can serve as an instant source of funds to handle these expenses, ensuring that you and your loved ones receive immediate medical attention without any delay. Many credit cards also offer health-related benefits, such as cashback on pharmacy purchases or healthcare services.
• Home repairs: Sudden home repairs, whether it’s a leaky roof or faulty appliances, can disrupt your budget. In such situations, your credit card can provide the necessary funds to undertake the repairs immediately, saving you from further damage and potential costs.
• Gifts: Unexpected occasions such as weddings or birthdays may require you to buy gifts at short notice. A credit card allows you to make the purchase instantly, providing you the convenience to repay the amount later.
• Travel: Whether it’s an unplanned trip or an emergency travel situation, your credit card can cover the expenses, ranging from flight tickets to hotel bookings. Some credit cards also offer travel benefits like free lounge access or travel insurance, making your journey more comfortable and secure.

Maximising the power of reward points

Reward points or cashback earned from your credit card transactions can be an unexpected source of savings during emergencies.

• Redeem points for purchases: Most credit cards allow you to redeem your accumulated reward points to pay for purchases on partner websites. This can help you save on essential expenses during emergencies. The Platinum Visa Credit Card by IndusInd Bank is designed to enhance your reward-earning potential. With this card, you can earn 1.5 reward points for every ₹150 spent, allowing you to accumulate rewards faster.
  
• Ticket bookings: If your emergency requires travel, you can redeem your reward points to book flight / train / bus tickets. This can considerably reduce your travel expenses. For instance, by accumulating air miles on your IndusInd Club Vistara Explorer Credit Card, you can save substantially on future travel expenses.
  
• Paying credit card bills: IndusInd Bank Credit Cards allow you to convert your reward points to cash credits. These credits can then be used to pay off your credit card bills, thus reducing your financial burden.

Making the most of the interest-free period

Credit cards offer an interest-free period, usually ranging from 20 to 50 days. This period starts from the date of the credit card statement generation to the due date of the balance payment.

During this period, you can use your credit card to make purchases or handle emergencies without incurring any interest charges, as long as you pay the total amount due by the due date.

This interest-free period can act as a short-term emergency fund, providing immediate liquidity without any additional costs.

Smart spending for reward maximisation

To maximise rewards on your credit card, consider the following tips:

• Fuel: Fuel surcharge waiver is available on all IndusInd Bank Credit Cards. Use credit cards like IndusInd Bank’s Legend Credit Card to-get 1% fuel surcharge waiver across all fuel stations in India.
  
• Dining: Earn reward points by enjoying meals at your favourite restaurants. IndusInd EasyDiner Credit Card allows you to enjoy meals at your favourite eateries and simultaneously earn reward points. This card offers an array of dining benefits, including a complimentary 1-Year EazyDiner Prime membership worth ₹2950, an instant discount of up to 25% (up to ₹1000 off) each time you book and pay via the EazyDiner app, and complimentary premium alcoholic beverage at over 200 selected restaurants for every diner. Now, every meal can be a rewarding experience.
  
• Travel: Accumulate air miles on your credit card for future travel, can help you save on your travel expenses.  By accumulating club vistara points on your Club Vistara Explorer Credit Card, you can save substantially on future travel expenses. This card goes a step further, eliminating the foreign currency mark-up on all international spends, and even gifts you complimentary business class ticket vouchers upon reaching milestone spends.

These rewards can be used to offset your credit card bill or for additional purchases, helping you save money. You can direct the saved money towards growing your emergency fund.

For example, with the IndusInd Bank Nexxt Credit Card, you earn 1 reward point for every ₹150 spent, which is equivalent to ₹0.75 in cash credit.

If you spend ₹1,50,000 on shopping and dining, you would earn 1,000 reward points or ₹750 in cash credit. This can be added to your emergency fund, helping you build it over time.

Conclusion

Building an emergency fund requires discipline and strategic planning. Your credit card can be a helpful tool in this process, allowing you to handle emergencies and grow your savings. The key is to use your credit card wisely and make timely payments.

IndusInd Bank’s Credit Cards come with attractive features such as a 100% digital application process, and reward points that don’t expire and can be converted into cash credits. Some cards even offer lifetime free benefits, ensuring there are no joining or annual fees. Harness the potential of your credit card today and give your emergency fund a significant boost.

Ready to take the right step towards growing your emergency funds? Apply for a credit card online with IndusInd Bank now!

Disclaimer: The information provided in this article is generic in nature and for informational purposes only. It is not a substitute for specific advice in your own circumstances. Hence, you are advised to consult your financial advisor before making any financial decision. IndusInd Bank Limited (IBL) does not influence the views of the author in any way. IBL and the author shall not be responsible for any direct/indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information.