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When Americans can’t afford something as small as a $400 expense, this is the No. 1 way they deal with it. It also may be the worst way.

A hypothetical $400 expense would be a hardship for many Americans.

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Fewer than half (45%) of Americans have an emergency fund, a 2023 CNBC survey found. Not only may that be especially costly now, when many savings accounts are paying well over 4% — you can see the best savings accounts rates you may get now here — it can land you deep in debt.

The Federal Reserve’s Economic Well-Being of US Households report, released in May 2023, revealed that a hypothetical $400 expense would be a hardship for many adults. Fewer than 2 in 3 (63%) adults said they would’ve been able to cover the expense using cash, savings or a credit card paid off at the next statement, with the remainder saying they’d have to borrow or sell something to cover an unexpected $400 expense. 

The No. 1 thing that people said they’d do if they couldn’t afford that expense? Stick it on a credit card that they’d pay off over time, the Fed survey showed.  “A credit card balance is some of the easiest debt to accumulate and some of the highest interest you can pay,” says certified financial planner Charles Thomas III at Intrepid Eagle Finance.

The survey indicates that 16% of adults said they’d put a $400 expense on their credit card and pay it off over time and 13% said they would not be able to pay for the expense right now, even if it meant borrowing, selling, using money from a loan or getting a deposit advance. 

Other ways individuals would cover a $400 emergency expense:

Put in on a credit card and pay it off over time 16%
Wouldn’t be able to pay for the expense right now 13%
Borrow from a friend or family member 9%
Sell something 6%
Use money from a bank loan or line of credit 2%
Use money from a payday loan, deposit advance or overdraft 2%

We asked financial experts and certified financial planners to share ways to avoid credit card debt — and how to pay less for it if you’re already in it.

Build up your emergency fund

Thomas says if you’re a single income household, think about a larger emergency fund than if you have two incomes in a household. “A good target for an emergency fund is about 3 to 6 months’ worth of living expenses for a dual income household and 4 to 7 months for a single income household,” says Thomas. You can see the best savings accounts rates you may get now here.

Having an emergency fund can also help protect you from credit card debt. If you need to put an unexpected purchase on a credit card, you can pay the balance off in full using your emergency fund which will save you the hassle of owing interest and paying more over the long run.

If you’re in credit card debt, get rates lowered

To avoid paying such high credit card rates, Matt Schulz, chief credit analyst at LendingTree says taking out a personal loan could be a good option. “If you have decent credit, you may be able to find loans with rates that are lower than what you’re currently paying on your credit card,” says Schulz. 

That said, you can always try calling your credit card issuer and asking them for a lower rate. “Your chances of success are likely far better than you realize. A new LendingTree survey showed that 76% of people who asked for a lower rate on a credit card in the past year got one and the average reduction was about 6 percentage points,” says Schulz. 

Consider a balance transfer card

“Using a balance transfer credit card is one of the best ways to avoid high interest while paying off your debt,” says WalletHub analyst Jill Gonzalez. “You could also refinance your debt using a debt consolidation loan at a smaller interest rate than your current debt,” says Gonzalez. 

Pay more than the minimums on your card so debt doesn’t spiral 

Another way she recommends avoiding excess debt is to pay more than the minimum due each month. “You’ll manage to repay the debt sooner and pay less interest,” says Gonzalez.

Watch out for ‘buy now, pay later’

Surely you’ve seen offers for buy now, pay later options when checking out at an online retailer. “These services generally allow you to make 4 no-interest payments for a purchase over a set time, like every two weeks,” says Senitra Horbrook, credit cards editor at The Points Guy. This might sound enticing, but keep in mind that if you miss a payment, you’ll likely be charged late fees or interest, and if you stop making payments, your account will be turned over to a collection agency. Also, if you repeatedly opt into buy now, pay later programs, it can be hard to keep track of how many payments you’re making and and what exactly you owe.