Anonymous wrote:I rent currently, have my car paid off and have no credit cards. I pay for everything from my bank account, I had a layoff last longer than I thought it would so used my savings to cover me while I was looking for employment and am getting back on track now. But I am paycheck to paycheck mostly now with a salary reduction and I think I'm doing something wrong by not having credit cards. Everyone I know says to use the cards to pay bills and then pay off every month. I just don't understand how that's better than just paying the bills directly.

I prefer to pay directly for things as well.

The benefit to paying with credit cards is when you use the credit card to earn cash back or points. And points are only worth it if you actually use the points, and use them on things you would pay for anyway. And then you have to make sure that what you make back, cash-wise or points-wise, is more than any credit card fees or whatever, and you have to make sure you are paying it off on time every month. There is an administrative cost to all of that, so I just pay bills directly like you do. But for some it can make sense.

The only thing with putting everything on your credit card is that you need to track it and pay it off EVERY MONTH. Otherwise, you will rack up thousands in interest.

Anonymous wrote:You are foolish not to have credit cards --- because they establish credit. Adults need to have a credit history.

How you use them, and certainly great for you if you pay them off immediately, that's up to you.

I am sure OP has credit cards, they just don't use them to pay bills, dummy.

Anonymous wrote:I rent currently, have my car paid off and have no credit cards. I pay for everything from my bank account, I had a layoff last longer than I thought it would so used my savings to cover me while I was looking for employment and am getting back on track now. But I am paycheck to paycheck mostly now with a salary reduction and I think I'm doing something wrong by not having credit cards. Everyone I know says to use the cards to pay bills and then pay off every month. I just don't understand how that's better than just paying the bills directly.

Some credit cards have benefits. I have a credit card tied to my bank that offers 2% cash back (and more on rotating categories). Because I have my bank account with the same bank, I get a 30% bonus every time I transfer money back to my bank account, so really it's a 2.6% cash back card. On $3000 spend every month, that's almost $1000/year.

Other people use cards that have points attached that they use for vacations.

Anonymous wrote:You should have worked any job while looking for a job. Even my teenager has two jobs.
You use a credit card for the bills that don't require you to pay fees for using a credit card.
Many credit cards give 2% back on the money you charged on it over a year. Better than nothing and you build credit.
There are 20+ better things you can do to get yourself away from paycheck to paycheck.
I have done 50+ bigger and smaller things to save money and then invest the saved money.
Retired early without ever making ton of money.

Are you really this much of a jerk? OP saved for a rainy day and then it rained and they were ready. They took a job with a pay cut to bring money in and they are balancing their budget in changed circumstances. The world is weird and times are tough.

OP, you are doing a great job. Ignore trolls like PP.

Anonymous wrote:

Anonymous wrote:I rent currently, have my car paid off and have no credit cards. I pay for everything from my bank account, I had a layoff last longer than I thought it would so used my savings to cover me while I was looking for employment and am getting back on track now. But I am paycheck to paycheck mostly now with a salary reduction and I think I'm doing something wrong by not having credit cards. Everyone I know says to use the cards to pay bills and then pay off every month. I just don't understand how that's better than just paying the bills directly.

-Easier to track money coming in and out (pay CC once instead of multiple small bills)
-Build up your credit
-Rewards dollars/cashback for all CC spending

This is ONLY if you are sure you can pay it in full every month. Do NOT get in the habit of using CC to buy thinks you can't afford. For a true emergency, if you end up with a balance you can open a new card that gives you six months at zero interest. ONLY if you are going to be super responsible and pay everything without paying interest. You send very responsible, so you would be a decent candidate to do this.

This is the answer.

You should have a credit card you use once a month and pay off completely every time. You should never ever put more money on the credit card than you have in your checking account.

Otherwise, you are doing just fine. Try to slowly build up your emergency fund again. You're doing great.

You should have worked any job while looking for a job. Even my teenager has two jobs.
You use a credit card for the bills that don't require you to pay fees for using a credit card.
Many credit cards give 2% back on the money you charged on it over a year. Better than nothing and you build credit.
There are 20+ better things you can do to get yourself away from paycheck to paycheck.
I have done 50+ bigger and smaller things to save money and then invest the saved money.
Retired early without ever making ton of money.

Anonymous wrote:I rent currently, have my car paid off and have no credit cards. I pay for everything from my bank account, I had a layoff last longer than I thought it would so used my savings to cover me while I was looking for employment and am getting back on track now. But I am paycheck to paycheck mostly now with a salary reduction and I think I'm doing something wrong by not having credit cards. Everyone I know says to use the cards to pay bills and then pay off every month. I just don't understand how that's better than just paying the bills directly.

Money is tight and you are living paycheck to paycheck. Don't use credit cards. There is a very very high probability that you'll not pay them in full every month. Avoid credit cards until your financial situation improves.

Because you don't understand that the American financial system works on this completely stupid idea of judging people's financial reliability by their use of credit cards.

It shouldn't work like this, but it does.

So you are deeply damaging yourself by not exploiting this completely stupid system.

What you should have done since your early adult years is to have one or two credit cards and ONLY SPEND between 1-10%, max, of the credit limit, every month. If you don't use your cards, you won't have a credit score, and your chances of getting loans in the future are small (for cars, housing, etc). You will be a RISK for banks and landlords, who will not want to deal with you. The closer to your credit limit you get, even if you pay it off every month, the worse your score will be. And of course, never, ever, forget to pay it off every month!

So you've got to be in that sweet spot of:
1. Having a salary to prove you are employed.
2. Having a good credit score to prove you know how to use credit responsibly.

And then the world is your oyster.

The “advantage” a credit could’ve given you when you were unemployed is that you can charge things and then make only a small minimum payment every month, which would’ve allowed you to hold on to most of your savings.

But CC interest rates are very high. If you’re just making the small minimum payment every month, it becomes very hard to get out of debt and it can take many years to get yourself out of the debt hole.

So while it’s good to have a credit card or two, it’s best if you always pay your balance in full every month. Which means you shouldn’t charge more than you can afford to pay every month and you need to have the self-discipline to do that.

You are foolish not to have credit cards --- because they establish credit. Adults need to have a credit history.

How you use them, and certainly great for you if you pay them off immediately, that's up to you.

We use credit cards for almost everything but carry no debt because we pay them off each month. The main reasons are rewards (cash back, travel, etc), convenience and consumer/fraud protection. You are generally protected if your card or number is lost or stolen. Credit card companies are very good about notifying you about fraudulent activity and shutting it down quickly. It's good to have more than one card for this reason in case one card needs to be closed quickly.

Are you using debit cards or how do you make most consumer purchases? If that's the case, the obvious risk is that if there is fraud or illegal activity, it's your money and your bank account that can be drained, which can contribute to other issues like a rent check bouncing. That's not the case with credit cards.

It's true you have to be responsible and if you have a spending problem or a history of bankruptcy, your approach might make sense, but I think the average person is far more protected using credit cards.

Anonymous wrote:I rent currently, have my car paid off and have no credit cards. I pay for everything from my bank account, I had a layoff last longer than I thought it would so used my savings to cover me while I was looking for employment and am getting back on track now. But I am paycheck to paycheck mostly now with a salary reduction and I think I'm doing something wrong by not having credit cards. Everyone I know says to use the cards to pay bills and then pay off every month. I just don't understand how that's better than just paying the bills directly.

-Easier to track money coming in and out (pay CC once instead of multiple small bills)
-Build up your credit
-Rewards dollars/cashback for all CC spending

This is ONLY if you are sure you can pay it in full every month. Do NOT get in the habit of using CC to buy thinks you can't afford. For a true emergency, if you end up with a balance you can open a new card that gives you six months at zero interest. ONLY if you are going to be super responsible and pay everything without paying interest. You send very responsible, so you would be a decent candidate to do this.

I rent currently, have my car paid off and have no credit cards. I pay for everything from my bank account, I had a layoff last longer than I thought it would so used my savings to cover me while I was looking for employment and am getting back on track now. But I am paycheck to paycheck mostly now with a salary reduction and I think I'm doing something wrong by not having credit cards. Everyone I know says to use the cards to pay bills and then pay off every month. I just don't understand how that's better than just paying the bills directly.