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How to Lower Your Credit Card Interest Rate in 4 Steps

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The information provided on this website does not, and is not intended to, act as legal, financial or credit advice. See Lexington Law’s editorial disclosure for more information.

As an educated consumer and a responsible borrower, you may be wondering how you can lower your hefty credit card interest rates. After all, a few years have probably passed since you first applied, and perhaps your credit score has gone up since then. Luckily, it’s very possible to score a reduced rate by following these steps:

  1. Work to improve your chances of getting approved by following good credit habits and ensuring you have a solid history of on-time payments.
  2. Research your current interest rate and how it stacks up to what competing credit card companies are offering.
  3. Call your credit card issuers to negotiate a lower interest rate, explaining why you deserve it.
  4. If you’re rejected, try again and ask to speak to a different person, or consider alternative options.

1. Improve Your Chances of Getting Approved

Since interest charges are a big moneymaker for credit card issuers, a reduced rate is a big ask. Credit card companies will likely only be willing to bend for their best customers, so you’ll first want to do everything you can to set yourself up for success.

This means ensuring your credit score is in tip-top shape—specifically, a “good” FICO rating or better. Aim for a FICO score of at least 670 before you ask for an interest rate reduction, although you may want to aim for 740 to bump yourself up to the “very good” bracket.

You’ll also want to ensure you have a reliable history of on-time payments. If you’ve had a shaky history of missed or late payments, you may want to focus on making on-time payments for a year before you ask for a reduced interest rate.

Improving your credit standing, especially if you’ve previously struggled with negative items, is a process that takes time. Rather than looking for a quick-fix solution, focus on building good habits—it can only help when it comes time to ask for a reduced interest rate.

2. Do the Research

Now that you’ve worked to improve your credit standing, you’ll want to do some research before calling your credit card issuer. First, check what your current interest rate is. You can find this on your monthly credit card statement. How does your rate compare to what’s considered “good?” How does it stack up to rates competitors are offering?

What’s a Good Interest Rate on a Credit Card?

As of September, the average credit card APR charged is 16 percent. If your interest rate is even a few percentage points below this number, that could be considered a good rate, and negotiations to go any lower may be unsuccessful.

On the flip side, if your interest rate is substantially higher than average, you may have more wiggle room to negotiate—especially if you’ve improved your financial standing and credit score since you first applied.

What Are Competitors Offering?

Credit card companies need to offer competitive interest rates in order to stay in business. They know it’s a competitive industry and that losing customers is expensive. If you can find comparable cards with lower interest rates, this can be ammunition in your plea for a lower rate.

Look at other available cards and their terms and interest rates. Take note of the card name, credit card company and interest rate. Keep this handy for when it’s time to call your credit card issuer. The more specific you can be the better.

In a 2019 study, 81% of those who asked for a reduced interest rate received one. The average reduction was approximately 6 percentage points. Source: CompareCards.com

3. Ask Your Credit Card Issuers

Once you’ve researched the competition and worked to improve your chances of getting approved for a lower interest rate, it’s time to begin calling your credit card issuers.

If you have multiple credit cards, you’ll want to call all of the issuers. You may want to start with the card you’ve had the longest, because you’ve had time to build up a track record as a loyal customer.

Alternatively, you could start with the card that carries the highest interest rate. A reduction here could help you save more money, but keep in mind that you won’t necessarily be able to leverage your long history as a reliable customer.

Start by explaining who you are and why you deserve consideration for an interest rate reduction. Make sure to mention your credit score and how many years you’ve been a customer. Consider the following script:

“Hi, my name is ____, and I’ve been a customer since ____.

I’ve always made on-time payments, and I have a [good/excellent] credit score of ____.

I’m calling because I’d like to lower my interest rate, which is currently __percent.”

Do: Research beforehand, have specific numbers and know your worth as a customer.

Don’t: Go into a call unprepared or without knowing exactly what you’re asking for.

How to Ask for a Lower Interest Rate: Hi, my name is ____, and I’ve been a customer since ___. I’ve always made on-time payments, and I have a [good/excellent] credit score of ___. I’m calling because I’d like to lower my interest rate, which is currently __%. Source: Debt.org

Then, explain the reason you want an interest rate reduction. Maybe you’ve recently faced furlough or wage cuts or you need to pay off expensive medical bills. Or maybe you’re just trying to improve your credit score and would like to pay down your debt.

Do: Be factual and explain your situation.

Don’t: Be rude, demanding or entitled.

This is also a great time to bring up competitors. If you prepared for the call, you will be aware of competitors and what those other companies are offering. Be specific—mention other credit card companies and their APR offers, and suggest that if you aren’t able to reach an agreement, you’ll consider taking your business elsewhere for more competitive rates.

Do: Be specific about what other competitors are offering and see if they will match rates.

Don’t: Cancel your card if you don’t get a reduced rate, as this may hurt your credit score.

If you score a lower rate—congratulations! Now move on to the next credit card issuer. If you receive a “no,” or a compromised rate that is still higher than you’d like, try again in a few weeks and ask to speak to someone different.

Do: Be diligent about following up or speaking to a supervisor if things aren’t faring well.

Don’t: Give up after the first try. Ask for the reasoning behind a “no” so you can change your situation to get the rate you want.

Does Asking for a Lower Interest Rate Affect Credit Score?

The only way asking for a lower interest rate could hurt your credit score is if it requires the creditor to pull a hard inquiry. Credit card companies may do this to look at your credit report to see if you qualify for a lower interest rate.

A hard inquiry may cause your credit score to drop a few points—however, it can only affect your credit score for up to 12 months. That said, if you successfully score a lower interest rate, it may indirectly help increase your credit score since paying off your debt will be less costly.

Remember that credit card interest rates aren’t reported to credit bureaus since they don’t directly affect your credit score, so a hard inquiry is the only scenario that would hurt your score.

4. Consider Alternative Options

If your credit card issuer won’t budge on your interest rate, it may be time to consider other ways to lower your credit card interest rate. These are typically temporary solutions while you work to pay down your debt, and they don’t result in long-term reduced rates.

Balance Transfer

If you’re unhappy with your current interest rate, a balance transfer allows you to transfer your current account balance to a different card with a lower interest rate. You then make payments to your new account, saving money in interest charges.

Keep in mind that balance transfer interest rates, while low, are usually temporary. This means your introductory rate will likely increase after the promotional period is over. Aim to pay off the majority of your debt before this happens to make the most of your balance transfer.

Debt Consolidation

With debt consolidation, you can take multiple high-interest credit card balances and combine them into a single loan with a potentially lower interest rate. Just keep an eye out for fees and penalties. Additionally, you’ll want to review the loan terms and restrictions to see if the repayment timeline is suitable for your needs.

Long-Term Benefits of a Lower Interest Rate

It’s no secret that a lower interest rate is favorable. It saves you money when you’re paying off credit card debt. However, for those with significant credit card debt, a lower interest rate may also allow you to pay off your debt sooner. This, in turn, saves you more money in interest over time and allows you to see an increase in your credit score sooner.

Remember to maintain good credit management even after you’ve scored a lower interest rate and paid down your debt. On-time payments, low credit utilization and a long credit history are all important things to keep in mind. Despite good credit management, errors are surprisingly common in credit reports, which can cause your score to dip for unfair reasons. Learn about how credit repair can help you dispute these questionable negative items and get you back to the credit score you deserve.


Reviewed by Kenton Arbon, an Associate Attorney at Lexington Law Firm. Written by Lexington Law.

Kenton Arbon is an Associate Attorney in the Arizona office. Mr. Arbon was born in Bakersfield, California, and grew up in the Northwest. He earned his B.A. in Business Administration, Human Resources Management, while working as an Oregon State Trooper. His interest in the law lead him to relocate to Arizona, attend law school, and graduate from Arizona State College of Law in 2017. Since graduating from law school, Mr. Arbon has worked in multiple compliance domains including anti-money laundering, Medicare Part D, contracts, and debt negotiation. Mr. Arbon is licensed to practice law in Arizona. He is located in the Phoenix office.

Note: Articles have only been reviewed by the indicated attorney, not written by them. The information provided on this website does not, and is not intended to, act as legal, financial or credit advice; instead, it is for general informational purposes only. Use of, and access to, this website or any of the links or resources contained within the site do not create an attorney-client or fiduciary relationship between the reader, user, or browser and website owner, authors, reviewers, contributors, contributing firms, or their respective agents or employers.

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Habits of The 800 Club — The Path to Perfect Credit

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The information provided on this website does not, and is not intended to, act as legal, financial or credit advice. See Lexington Law’s editorial disclosure for more information.

A credit score of 800 or higher is considered a perfect score. At this level, individuals are given the best rates on their mortgages, credit cards, loans and any other form of credit. Americans who boast a credit score of 800 or more are exclusive members of the 800 Club. Keep reading to find out all about the 800 Club and how you can become a member.

What Is the 800 Club?

“The 800 Club” is a common phrase used to describe Americans who have a credit score of 800 or higher. According to FICO, in 2019, just 22 percent of Americans were a part of this exclusive group.

Being a part of the 800 Club gets you access to the lowest rates for borrowing costs, as well as plenty of other benefits. First, you’ll be approved for any type of credit card. This includes credit cards with no annual fees, cards with significant initial spending limits, cards with 0 percent financing, no-foreign-fee credit cards and cards from hotels, airlines and retail stores.

You’ll also get the best rates when it comes to taking out a mortgage, an auto loan, a credit line, a personal loan or student loan refinancing options. And anytime your credit score is checked—such as for an apartment rental or a job application—you’ll pass inspection with flying colors.

It’s essential to understand that you can still get the same or similar benefits once your credit score is 700 or higher. That’s why it’s good to shoot for higher credit, even if a score of 800 feels impossibly far away right now. The higher your credit score climbs, the more benefits you receive.

How Can You Be Like Consumers in the 800 Club?

There are everyday habits that consumers in the 800 Club all have. If you understand these habits and emulate them, you’ll be guaranteed to see a rise in your own credit.

Maintain a Zero Balance

When used correctly, credit cards can be an asset rather than a liability. Those in the 800 Club understand that using credit is beneficial to your credit score, but only if you pay off the amount owed in full every month.

By completely paying off your balance every month, you pay zero interest, maintain complete debt control and show lenders you’re responsible with money. Paying off balances in full needs to happen on time and every month.

You should also work to understand credit utilization. Your credit utilization is the amount of credit available to you versus the amount you use. Generally speaking, it’s ideal to keep your credit utilization ratio under 30 percent. If you pay everything off every month but have a high credit utilization ratio, your credit score will be negatively impacted.

For example, if you have two credit cards with credit limits of $5,000 each, you have $10,000 available every month. If you spend $7,000 on those cards every month and pay it off in full, your credit score may still suffer because your credit utilization is 70 percent. Lenders prefer a low credit utilization ratio as it shows you’re not relying on credit to cover your expenses.

Have a Diverse Mix of Accounts

Having a healthy credit score means having a diverse mixture of accounts. Lenders want to see that you can handle many different types of debt and still maintain responsible habits. 800 Club members often have a portfolio mix of revolving credit (credit cards, credit lines, etc.) and installment debt (mortgages, personal loans, student loans, etc.).

However, it’s not recommended you increase your overall indebtedness just for the sake of improving your credit diversity.

Be Selective About New Accounts

As you look to build your credit, you may start to open some new accounts. Whenever you do this, make sure always to read the fine print and look out for good benefits. There are plenty of lenders out there competing for your business, so always do some comparison shopping.

Avoid retail credit cards, which often have high interest rates and fees. Instead, find cards with the best rates, sign-up bonuses, reward programs and no annual fees. Smart credit will help you spend and save.

And make sure to never sign up for any credit that’s too risky, such as payday loans.

Avoid Cosigning

Cosigning may feel like a nice gesture for someone who needs your help, but it’s often a road to credit problems. When you cosign on anything, you accept full responsibility for paying it back if the other party fails to make payments.

Additionally, anytime the other party makes a late payment or misses a payment, it impacts your credit score too. It’s too risky to have your credit score tied to someone else’s actions. If possible, avoid these problems by politely declining any requests to cosign on credit.

Lower Your Debts

One of the main factors in determining your credit score is your debt-to-income ratio. Individuals who are part of the 800 Club live well below their means and have a low debt-to-income ratio. This means they prioritize paying off their debts and don’t overspend.

If you have any debt, from student loans to mortgages, lowering these balances can infinitely improve your credit score.

Stick to a Budget

In order to ensure you’re not spending beyond your means, you’ll need to stick to a budget. People don’t just get into the 800 Club by accident. They plan their finances, make smart decisions and stick to the plan. A budget will allow you to quickly pay off any existing debts and, once your debts are paid off, maintain a zero balance.

Budget planning has never been easier than it is today. There are plenty of automated budgeting apps, such as Mint (free) and YNAB (subscription-based), that link to your bank accounts and provide insights for you. You’ll be able to set budgets and goals and receive alerts when your finances are off-track.

Clean Up Your Credit Reports

If you have the goal of getting into the 800 Club, it starts with knowing where you currently are and what’s holding you back. Start by getting a free copy of your credit reports and reviewing your credit score.

If any negative items are incorrect on your credit reports, you can dispute them. If you find any other information that has negatively impacted your credit reports, you can ensure you don’t make those mistakes again.

Start Working Now to Improve Your Score

It’s never too late to start working on your financial habits and improving your credit score—and the earlier you start in life, the better. Start building healthy financial habits now and you’ll see your credit score steadily increase.

You’ll greatly benefit from your efforts with better interest rates, more financial opportunities and easier approvals for all types of applications. And, in no time at all, you’ll be a member of the 800 Club yourself!

If your credit score is low and you don’t understand how to tackle fixing your score, consider credit repair services. Lexington Law has credit professionals who can review your credit report and dispute any inaccurate or unfair negative line items.

We save you the time and effort of dealing with the credit bureaus, and we know how to get results because we’ve dealt with them before. Contact us now to find out how we can help you fix your credit.


Reviewed by Kenton Arbon, an Associate Attorney at Lexington Law Firm. Written by Lexington Law.

Kenton Arbon is an Associate Attorney in the Arizona office. Mr. Arbon was born in Bakersfield, California, and grew up in the Northwest. He earned his B.A. in Business Administration, Human Resources Management, while working as an Oregon State Trooper. His interest in the law lead him to relocate to Arizona, attend law school, and graduate from Arizona State College of Law in 2017. Since graduating from law school, Mr. Arbon has worked in multiple compliance domains including anti-money laundering, Medicare Part D, contracts, and debt negotiation. Mr. Arbon is licensed to practice law in Arizona. He is located in the Phoenix office.

Note: Articles have only been reviewed by the indicated attorney, not written by them. The information provided on this website does not, and is not intended to, act as legal, financial or credit advice; instead, it is for general informational purposes only. Use of, and access to, this website or any of the links or resources contained within the site do not create an attorney-client or fiduciary relationship between the reader, user, or browser and website owner, authors, reviewers, contributors, contributing firms, or their respective agents or employers.

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How Much Should You Spend on Christmas? 13 Spending Statistics

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The information provided on this website does not, and is not intended to, act as legal, financial or credit advice. See Lexington Law’s editorial disclosure for more information.

Christmas time is a joyful season for many, but unless you’re intentional with your finances, it can quickly become a source of stress.

When determining how much you should spend this year, it makes sense to consider how much others typically spend. For an average baseline of how much you should shell out this year, many financial experts suggest calculating one percent of your annual income to arrive at a figure that won’t break the bank.

With each passing year, the holiday season’s focus on consumption seems to loom larger than the last. Grandiose store displays and nonstop commercials pressure us to spend far more than we can afford—leaving many Americans with the unfortunate burden of credit card debt come the new year.

According to NerdWallet’s 2019 Holiday Shopping Report, 71 percent of shoppers planned to use a credit card to fund their holiday spending. While the use of credit cards during the holidays might not come as a shock, the debt many are left with long after the holiday season ends is more concerning: Roughly 48 million Americans were still paying off credit card debt from their 2018 holiday expenditures in 2019, according to the same report.

If you’d rather avoid paying off this year’s holiday well into next year, all you need is a bit of preparation and a plan of action to keep your spending in check.

Alt text: Average Holiday Debt Per Year (2015–2019): 2015: $986. 2016: $1,003. 2017: $1,054. 2018: $1,230. 2019: $1,325. Source: Magnify Money

How to Determine How Much to Spend on Christmas This Year

When figuring out how much you should shell out for your Christmas spending, it can be helpful to look at some national averages as a baseline. According to a Gallup study, Americans planned on spending an average of $942 on gifts in 2019.

Compare this to the average household income of around $69,000 as reported by the U.S. Census Bureau, and you get an idea of what a reasonable amount might be for you. If you make $34,500—half of the national average—a general guideline could be a gift budget of around $471, or half of the average spent on gifts. Financial experts recommend spending around one percent of your take-home pay on gifts.

To be sure you can afford your holiday spending, creating a budget ahead of time is your best bet. It doesn’t have to be elaborate, but having a clear picture of your finances up front can save you stress down the line.

Start by listing out all your monthly fixed expenses—the expenses you know you must pay each month. This includes food, home utilities, gas and other monthly expenses like cable and phone bills. Subtract your monthly expenses from your monthly income and see how much you have left. This is your disposable income.

From there, decide how much of your disposable income you can put towards your Christmas spending. If you can put all of it in, that’s great! If you’re worried it’s not enough, consider where in your current budget you can reign in your spending in order to bulk up your holiday budget.

Holiday Spending Statistics

  • 71 percent of shoppers planned to use a credit card to fund their holiday spending. (Source: NerdWallet)
  • Holiday retail sales throughout the last two months of 2019 grew to $730.2 billion. (Source: National Retail Federation)
  • Non-store holiday sales grew by 14.6 percent in 2019. (Source: National Retail Federation)
  • U.S. holiday spending sales reached over $1 trillion in 2019. (Source: eMarketer)
  • Roughly 48 million Americans were still paying off credit card debt from their 2018 holiday expenditures in 2019. (Source: NerdWallet)
  • The average household income for Americans is around $69,000. (Source: U.S. Census Bureau)
  • Individual Americans planned to spend an average of $942 on gifts in 2019. (Source: Gallup)
  • Holiday retail sales came in at about a whopping $1.007 trillion dollars in 2019, a 4.5 percent increase from 2018. (Source: eMarketer)
  • Holiday travelers spent an average of 14 percent more per trip for 2019 than in years past. (Source: Squaremouth)
  • Holiday Trip cost averaged out to $4,056 per trip in 2019 for those traveling within the U.S. (Source: Squaremouth)
  • Spending on experiences, such as dining in restaurants, accounted for over a quarter of holiday spending in 2019. (Source: Deloitte)
  • 59 percent of all food and beverage spending took place in restaurants. (Source: Deloitte)

Tips to Stay on Budget and Out of Debt This Holiday Season

In order to stay on budget for the holidays, a plan is essential. The following tips will ensure you stay on track and out of credit card debt.

Before You Shop, Make a List

Before you spend a dime, make a list of everyone you intend to buy a gift for. That might not only be your immediate and extended family, but also friends, neighbors, kids’ teachers or coworkers. Then write the dollar limit for how much you can spend on each person.

Use this printable to keep track of every person on your gift list and how much you’ve spent. The two money-related columns—one for your planned budget for each person and one for how much you actually spend—can help you keep track of any leftover funds you might have. If you end up under-budget for one person, note it in your tracker and allocate the money elsewhere.

Holiday gift tracker printable

Don’t Forget Non-Gift Items: Gift Wrap, Ingredients, Decorations, etc.

Gifts aren’t the only thing you should budget for—many other festive costs will likely come up. Buying a Christmas tree, lights and a tree stand can get pricey fast, and that’s just one example. Home decorations, outdoor Christmas lights, gift wrap and holiday meal ingredients should all be accounted for in your holiday budget.

Most people don’t think about their homemade holiday meals when it comes to their budget—considering it’s usually just an extended grocery list, it’s easy to forget how quickly all those extra ingredients add up throughout the season. Instead of letting it sneak up on you, use our menu planning printable to keep up with holiday meal planning and stay on budget. Feel free to print one off per meal or event you need to plan for.

Holiday meal planner printable

Don’t Spend According to Sales: Stick to Your List

There are countless temptations vying for your attention and your wallet during this time of year. Stumbling upon what feels like a once-in-a-lifetime deal inevitably happens more often throughout the holidays, and unless you’re intentional about what you need and can afford, those impulse-spending moments can take a toll on your finances. If you make a commitment to only buy the things on your list, you’ll know exactly where your money is going and won’t be tempted to stray from your plan.

For a bigpicture look at all your holiday spending, use this printable to record your budget for each of your spending categories and keep up with how much you’ve actually spent.

Holiday budget tracker printable

While managing your finances responsibly during the holidays is tough, the process is fairly simple. It all comes down to planning ahead and being intentional about what you can afford.

When you’re proactive about making a budget, you avoid having excessive use of your credit card over the holidays. This can prevent you from accumulating a high credit utilization ratio, which is the result of borrowing too much money from your credit lines.

If you’re unsure of how your credit utilization score is impacting your overall credit, the credit repair counselors at Lexington Law can help you get clear on where you stand before the holiday season is underway.

Give yourself the gift of a stress-free season by protecting yourself from bad credit and staying debt free. Making a plan for your holiday finances ahead of time might be the most rewarding gift you receive all year.


Reviewed by Kenton Arbon, an Associate Attorney at Lexington Law Firm. Written by Lexington Law.

Kenton Arbon is an Associate Attorney in the Arizona office. Mr. Arbon was born in Bakersfield, California, and grew up in the Northwest. He earned his B.A. in Business Administration, Human Resources Management, while working as an Oregon State Trooper. His interest in the law lead him to relocate to Arizona, attend law school, and graduate from Arizona State College of Law in 2017. Since graduating from law school, Mr. Arbon has worked in multiple compliance domains including anti-money laundering, Medicare Part D, contracts, and debt negotiation. Mr. Arbon is licensed to practice law in Arizona. He is located in the Phoenix office.

Note: Articles have only been reviewed by the indicated attorney, not written by them. The information provided on this website does not, and is not intended to, act as legal, financial or credit advice; instead, it is for general informational purposes only. Use of, and access to, this website or any of the links or resources contained within the site do not create an attorney-client or fiduciary relationship between the reader, user, or browser and website owner, authors, reviewers, contributors, contributing firms, or their respective agents or employers.

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Building an Emergency Fund – Lexington Law

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The information provided on this website does not, and is not intended to, act as legal, financial or credit advice. See Lexington Law’s editorial disclosure for more information.

Most everyone experiences financial difficulties in their lives, and that’s precisely why financial advisors and financial planning experts recommend individuals build an emergency fund. An emergency fund is a personal savings reserve set aside in the event of future unexpected expenses or mishaps.

Emergency funds should always be available as liquid assets so that you can access them at a moment’s notice.

Why Do I Need an Emergency Fund?

While no one wants it to happen, unfortunately, financial hardships or enormous unexpected costs sometimes occur. For example, people are suddenly let go from their jobs due to recessions, or their cars break down or they incur significant medical debts after an accident or diagnosis.

Whatever the reason, the one consistent factor is that these are always a surprise.

According to the 2017 Report on the Economic Well-Being of U.S. Households, approximately 40% of Americans couldn’t cover a $400 emergency. And one in three Americans has zero budget for car repairs. Considering how likely it is that a $400 emergency or car repair will occur at some point within your average year, this is highly concerning.

Without an emergency fund in place, you might turn to dire solutions. For example, you might go to a payday lender, who would have very high interest rates. Or you might not be able to pay rent and be evicted.

Whatever the case, even a small setback, like an unexpected bill, can often send someone spiraling into debt. An emergency fund is like a shock absorber for setbacks in life.

How Much Money Should Be in My Emergency Fund?

There is some debate about exactly how much should be in your emergency fund. Ultimately, it’s an entirely personal decision. For example, someone who is in contract work or works for themselves may want to build an emergency fund that’s larger because their income stream is less reliable than that of a traditional job.

Ideally, you want to have around six months’ worth of living expenses saved up. If you lose your job, it can take you several weeks or months to find a new position. You want to have enough money saved up that you can comfortably handle losing your job or large expenses being thrown your way.

Where Should I Keep My Emergency Fund?

Ideally, you want to keep your emergency fund in a savings account. You don’t want the money locked up in investments. It should be accessible immediately to you, without penalty. You can also make your emergency fund work for you. Put it in a high-interest savings account (HISA) rather than a regular savings account so it earns interest as it sits there.

Another tip to remember is that you should keep your emergency fund in a separate bank or account from your regular accounts. If you see your emergency fund every day, you may be tempted to dip into it for nonemergency situations.

How to Start Building an Emergency Fund

It may feel overwhelming when you think about how to build an emergency fund. However, if you tackle it step by step, the process becomes a lot more manageable.

Set a Reasonable Goal

First, it’s important to set an end goal. When you know what you’re working toward, it’s much easier to track your progress.

Decide how many months of living expenses you want to save up for. Consider factors like your job stability, the amount of your previous unexpected expenses and your risk tolerance. Other variables should be considered too.

If this has been an incredibly expensive year for you, you could choose first to build up three months’ worth and then work your way up after that.

Next, calculate your average monthly living expenses. We suggest opening all your accounts and combing through the last four months. This will give you a rough idea of how much you typically spend per month. Make sure to only include the bare necessities. Then, multiply your desired months by your typical monthly expenses, and you’ll have a goal to work toward.

Make sure your goal is reasonable—if you choose an unattainable goal, you’re more likely to get discouraged along the journey.

Track Your Budget

Next, you will want to figure out a budget and stick to it. You should have an amount you want to set aside for your emergency fund every month so you can meet your desired goal.

Use an app like Mint or YNAB to track your money. That way, if you ever fall short of your goal, you can analyze your spending to see where you can cut back.

Make It Automatic

If you receive direct deposits, you can set up automatic transfers for your savings. This will allow you to regularly contribute to your goal without thinking about it. You also won’t be tempted to spend the money because you won’t see it sitting in your bank account.

Put Away Any “Extra” Money

Chances are, throughout your year, there will be times when you come into some unexpected cash. This could be from birthday presents, bonuses or tax refunds. Make a promise to yourself now that when you get this money, you will put it into your emergency fund.

Sell Something

Take a look around your home and see if there’s anything you can sell. There might be clothes, old electronics or furniture that you can get rid of. This extra income can build an emergency fund much faster (and simultaneously declutter your home).

Modify Your Expenses

Don’t feel like you need to cut out all discretionary spending, because if you budget too aggressively, you might just end up giving up on the project. Instead, choose to eliminate just one thing, like eating out. A small change can add up over the months and help you grow your fund.

And don’t forget to take a look at your fixed expenses to see if there’s room for budget cuts there too.

Reward Yourself (Occasionally)

Building up a large emergency fund will take a lot of discipline and commitment. Over time, as you put all your extra money into your fund, you might start to feel discouraged.

To avoid this situation, set up mini goals along the way. As you achieve these goals, you can reward yourself. For example, every time you hit another 10% milestone toward your final goal, you could treat yourself to a movie night or a Starbucks drink. This will help you have something to look forward to along the journey.

Use Credit Repair to Your Advantage

Credit repair has the power to reduce financial stress and contribute to your overall savings. As your score increases, you’ll be given new advantages you can use to achieve your goal.

  • Interest rates. Better credit equals lower interest rates for your credit cards. If you’re now paying less in interest, you can pass the savings on to your bank account for an instant emergency funding method.
  • Fees. Your budgeting app can set reminders for you so you never incur late fees again. Whatever you save in late fees can go to your emergency fund instead.
  • New benefits and rewards. Individuals with outstanding credit are often given access to the best interest rates and credit accounts. They receive benefits such as frequent flyer miles, cash back and shopping discounts. You can use these perks to continue to save in new ways and build up your emergency fund.

Your Safety Blanket

Your emergency fund is a saving grace when disasters in your life occur. It might be challenging to build it up, but you’ll be glad it’s there once you have it. Make sure to clearly define for yourself what constitutes an emergency.

And, if one occurs, don’t be afraid to dip into the fund. If you do use some of the funds, restart the journey to building it back up. This way, you’re always protected.


Reviewed by Cynthia Thaxton, Lexington Law Firm Attorney. Written by Lexington Law.

Cynthia Thaxton has been with Lexington Law Firm since 2014. She attended The College of William and Mary in Williamsburg, Virginia where she graduated summa cum laude with a degree in International Relations and a minor in Arabic. Cynthia then attended law school at George Mason University School of Law, where she served as Senior Articles Editor of the George Mason Law Review and graduated cum laude. Cynthia is licensed to practice law in Utah and North Carolina.

Note: Articles have only been reviewed by the indicated attorney, not written by them. The information provided on this website does not, and is not intended to, act as legal, financial or credit advice; instead, it is for general informational purposes only. Use of, and access to, this website or any of the links or resources contained within the site do not create an attorney-client or fiduciary relationship between the reader, user, or browser and website owner, authors, reviewers, contributors, contributing firms, or their respective agents or employers.

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