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Research and Statistics

4 in 10 Americans see credit cards as their emergency fund

Summary

About 49 percent say they’d use credit cards to pay at least part of a surprise $2,000 emergency expense, according to a Pew survey

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Although the majority of Americans say they would draw on checking or savings accounts to handle a large unexpected expense, 4 in 10 households would come up short and likely rely on credit cards to help cover the emergency, according to a study by The Pew Charitable Trusts.

If faced with a $2,000 surprise expense, 41 percent of respondents wouldn’t have enough cash savings to cover the bill, including a quarter who said they have less than $400 available.

Few heed the conventional advice of saving emergency funds equivalent to three to six months’ expenses. The study found that more than half of households (54 percent) could not replace a full month’s worth of income with cash savings. Even households with income above $85,000 reported safety nets of just 40 days.

About half (49 percent) of respondents — including 54 percent with household income of $50,000 or more — would use credit cards to pay at least part of the expense. Meanwhile, less than a third with incomes under $25,000 would turn to credit cards, being more likely (53 percent) to borrow money from friends or family.

A deeper dive into the demographics shows that whites and Hispanics were more likely to turn to credit cards than African Americans. And those in the 35 to 50 age range — Generation X — are more likely than any other generation to borrow on credit cards for emergencies.

The Survey of American Family Finances was conducted by GfK on behalf of Pew, administered to 7,845 adults during the last quarter of 2014 and released Nov. 18.

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