Many people do not believe they need an emergency fund because they think that a credit card should cover them in case they experience an emergency, and they believe that they will be able to get back into the workforce soon enough for their credit card debt not to matter.
But replacing your emergency fund with a credit card is the worst mistake you could possibly make with your emergency fund. Here are four reasons why you shouldn’t make this mistake:
1. Emergencies are expensive, and most people struggle for years to pay back large sums of debt.
Not having an emergency fund is one of the main reasons why people go into long-term credit card debt. Emergencies are usually very expensive, whether that’s a $2,000 ER visit or a $1,500 car repair or a $4,000 vet bill or a three-month-long loss of income after being laid off. A single emergency can easily send you into thousands of dollars in debt if you’re not prepared for it.
According to Bankrate, emergency expenses are the most common reason for credit card debt. A survey by Bankrate notes that 47% of those with credit card debt are in debt due to emergency expenses, including emergency medical expenses (15%), emergency car repairs (9%), emergency home repairs (7%), or other unexpected emergencies (16%).
And once you get to be thousands of dollars in debt, it can take years to pay off your credit card balance. The data on this is clear: Many people who carry credit card balances do so for years because their debt is too large to manage and interest rates are too high.
According to Bankrate’s 2025 Credit Card Debt Report, 48% of credit card holders carry a balance from month to month. And Bankrate’s 2024 Credit Card Debt Survey notes that 18% of credit card holders who carried a balance in 2024 did so for 5 years or more, meaning that they have likely paid several thousand dollars in credit card interest.
That same survey found that 9% of credit card holders who carried a balance had been doing so for 3–5 years, and 33% did so for 1–3 years. Only 16% of credit card holders who carried a balance on their debt did so for 6 months to 1 year, and 15% did so for less than 6 months.
If you put emergency expenses on your credit card with no emergency fund, you seriously run the risk of spending years trying to pay off that debt and accruing thousands of dollars in interest payments.
2. Not having an emergency fund puts your financial future at risk.
The problem isn’t just that large sums of credit card debt takes a long time to pay off—it’s that for each month that you carry a balance on your credit card, you accrue a mountain of interest, which is one of the leading reasons why people struggle to pay down their credit card debt. And the more time and money you spend on paying down your credit card debt and credit card interest means that you could miss out on a critical window to invest your money.
Credit card interest hurts your finances.
As of 2025, the average credit card APR for accounts that carry a balance is 22.80%, meaning if you carry a high credit card balance for months or years, you can easily spend hunderds or—even more likely—thousands of dollars in credit card interest. That’s hundreds or thousands of extra dollars that you wouldn’t have spent if you paid for those emergency expenses with an emergency fund instead relying only on a credit card.
The average credit card debt is $7,951 as of 2024, although that average is much lower for Millennials (who have $5,649 in credit card debt) and Gen Z (who have $2,854 in credit card debt). Gen X has a higher than average credit card balance of $8,134.
If we assume that an emergecy expense sends you into $4,000 in credit card debt, and it takes you 3 years to pay off that debt, you will have paid about $1,538 in interest in addition to your original $4,000 balance, assuming you have an APR of 22.80%. That’s $1,538 down the drain if you don’t have an emergency fund.
Paying credit card debt makes you miss out on investment opportunities.
Furthermore, taking years to repay debt means you’ll have less money to invest and you’ll miss out on your prime years for accumulating compound interest. Each year that you don’t invest (or invest minimal amounts of money) means that you’ll have to contribute even more money toward your retirement account later if you want to catch up on your progress toward saving for retirement.
If you spend 5 years delaying investing because you’re trying to repay your credit card debt, you will have missed out on half of the best decade of your life for building the compound interest that’s responsible for generating your wealth in retirement.
If you invest $100 per month from age 20 to 25, at the end of that time period, you will have contributed $6,000 toward your retirement. Assuming an 8% rate of return and monthly compounding, that amount could potentially grow to $97,755 after 35 years.
You could potentially lose out on about $91,755 in compound interest if you put investing on hold for 5 years in your 20s to pay off a $5,000 credit card bill:
If you invest $200 per month from age 20 to age 25, you will have invested $12,000. That money could potentially grow to $195,510 after 35 years, assuming an 8% rate of return and monthly compounding. That means that if you stop investing over a period of 5 years in your 20s to pay off a $12,000 credit card bill, you could possibly miss out on $183,510 in compound interest:
These examples show that putting investing on hold to pay off credit card debt could seriously decrease the amount of money you have in retirement if your credit card debt prohibits you from investing for several years. You should never use a credit card as a replacement for your emergency fund because of the enormous opportunity cost of putting investing on hold to pay off your credit card debt.
3. The job market is unpredictible.
As of 2024, the average job seeker spends 5.5 months looking for a job. This figure is even higher for unemployed job seekers (6.7 months). The prolonged job search is one of the most pressing reasons why you need to make building your emergency fund one of your highest priorities. Half a year with no income will wreck your finances if you put all of your expenses on your credit card because you don’t have an emergency fund.
4. Selling your investments to pay off emergency credit card purchases is a horrible habit.
Some people just use their credit card and sell off their investments to pay off their credit card debt when they encounter emergencies; they refuse to have an emergency fund because their money can grow faster in an investment account than in a high-yield savings account. However, this is a huge mistake—one that fundamentally misunderstands the purpose of your emergency fund and the purpose of your investment accounts.
Your emergency fund isn’t supposed to be profitable—it’s supposed to protect you (and be readily accessible) in case you experience an emergency.
Similarly, your investment or retirement account isn’t supposed to be an emergency fund; it’s supposed to be a place for you to keep and grow your money for decades until retirement. You’re not supposed to withdraw money from your retirement account until you actually retire. That’s why (depending on the type of retirement account you have) there are often penalties for withdrawing money from your retirement account, even if you experience a hardship.
Even if you sell investments from non-retirement investment accounts, you just don’t want to get in the habit of telling yourself that it’s okay to sell your investments to pay off your credit card debt because you don’t have any liquid emergency savings.
If you sell your investments to pay off your emergency credit card expenses, you are starting to build a very dangerous habit of touching your investments when you don’t actually need to (because you could have chosen to build an emergency fund). Once you start selling off investments the first time, it will become easier and easier for you to touch that money in the future.
Your investments are there as an absolute worst case scenario if your fully funded emergency fund runs out of money—your investments and a credit card are not a replacement for an emergency fund.
There are no benefits to replacing your emergency fund with a credit card. Relying on a credit card without also having an emergency fund means that you risk accruing long-term debt or establishing the bad habit of dipping into your investments to cover your emergency expenses. For the sake of your finances and your peace of mind, you should make building your emergency fund one of your highest priorities so that you don’t have to rely on credit cards to pay for emergency expenses.