The rules change when good economies go bad. Old standbys, like always pay more than the minimum on your credit cards, retire your mortgage as soon as possible, and a home equity line of credit (HELOC) is the best second mortgage because of its flexibility. Today, those rules are good for lining the bird cage but not much else.
Of course, it makes little sense to carry credit card balances month after month, paying high interest rates and other fees, chained to revolving debt for life.On a $5,000 balance at 18%, paying the minimum of $125 a month, it would take 273 months--almost 23 YEARS--to pay that off. And your total interest would be a crazy $6,923.14! By paying just $75 a month more, it would take you 32 months to be rid of your debt. In that time, you would pay only $1,313.96 in interest.

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So, why then would it be less than wise to make greater than minimum payments on credit cards in a recession? It isn't--once you have an emergency savings account fully-funded. Because if you have a financial emergency, your credit can be cut back or taken away, and if you have given all of your ready cash to creditors, you will be twisting in the wind.

Credit cards are unsecured debt, which means that your promise to pay is not tied to property, and if you need money to eat and things are tight, you can forgo making credit card payments or negotiate some kind of forbearance until your emergency has passed. Because credit card companies have to look out for themselves and their shareholders, they are likely to cut off your credit just when you need it most. So, you have to look out for you and yours--tap your credit if you see a financial emergency looming, stash your cash in an emergency fund, and do your best to ride out tough times. Once you have enough in the bank to take care of three to nine months of living expenses, get back on track to pay down your debts and restore your financial health.

You don't have to take my word for it--financial gurus like Suze Orman are all recommending that people look after their families first, their finances second. Here's what she says: "If you have an unpaid credit card balance [and] not much saved up in emergency savings, I need you to listen up. My advice has changed. I want you to only pay the minimum due on your credit card balance, and instead, make it your top priority to build as much of an emergency cash fund as you can."

So get that emergency fund in place. It could help you avoid bad credit in the future and help you avoid foreclosure if you experience a financial emergency.