While more than one-third of American households have experienced a major unexpected expense over the last year, such as a $1,000 emergency room visit or car repair, most are unable to cover the cost without borrowing, according to Bankrate's latest Financial Security Index survey.
For the survey, researchers asked respondents how they would deal with a major unexpected expense. Only 39 percent said they would use savings to cover the costs. Nineteen percent said they would finance the costs with a credit card and pay off the balance over time, and 13 percent said they would lower their spending on other things in their budget. Twelve percent said they would pay the costs with money borrowed from family or friends, and 5 percent would take out a personal loan.
According to the survey, American households making less than $30,000 a year were twice as likely to use borrowing options to cover the costs rather than savings. Cash was more likely to be used by households making more than $50,000 a year.
Read more about the survey here.
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