A lot of colleague are getting the new credit cards in my company. I asked few of them that why they are getting more Credit Cards, most of them said that they are doing it to get more diversified rewards. One of them was different, he said he is doing it for having more emergency fund. He has now 5 credit cards and the total amount he can use is Rs 10 Lakh or Rs 1 Million.
So this fund can be used at the time of emergencies. But the problem is the money in the Credit Card is not yours. That's the credit you are taking and thus you have to pay back in 45 days. So let's say you have taken Rs 10 lakh from Credit Card and thus you have just 45 days to pay the money back. If you don't have the money, then either you will convert it as an EMI or you will be in Credit Card debt.
People Should have emergency fund in their bank account and that money should be yours and not from someone else. You can take money from your friends when in need, but you have to prepare yourself to nor be in that position. The emergency fund should be created before anything. It is a must and it should be build before you start investing.
One thing I told my colleague that he can have more Credit cards with more amount but he should have the emergency fund in his bank account otherwise it will be a risky affair for his financial health. Emergency fund should be kept as liquid as possible because you might need that very soon. This statement can be changed little bit when you have Credit Card with more limits. Then you don't need the emergency fund now, because you can use ghe Credit Card but the amount which you are using should be there somewhere from which you can pay in 45 days or whenever the Credit Card due date is.
