This has been an interesting thread to read. Brought back some memories. I am retired and receive 2 check a month, but by direct deposit to my bank accounts. My recurring bills are automatically paid from a checking account or a credit card account. I charge groceries, gas for the car and other needs on the credit card. After the first of the month I payoff the credit card. The credit card has reward points. The points add up and about every three months I get $50 deposited in my checking account.

 

@JoeJester Good point but I have never had a credit card. Ever. In my opinion those things are poison! I know that if you pay them off quickly then they can be good bla bla bla but I just dont like the idea of spending money that I dont have.
@WBahn I see what your saying but then by that logic it does not matter if you are paid weekly or yearly. In my opinion, small budgets are easier to handle than big ones Plus there is a massive moral boost in getting paid weekly! I only ever had two jobs that both paid monthly and there was no drive for me to do those jobs either way. This new job though, every Friday is payday and that feeling is fantastic (you work hard the whole week, you get rewarded then and there instead of waiting 3 extra weeks).

I suppose I am saying that weekly pay feels better.

 

I suppose I am saying that weekly pay feels better.

That's the way I felt too after starting to work where that was the way it was done. But to Wbahn and some others, you should quit that job to get a better way of getting paid. We as workers/employees are at the mercy of the employer. One thing that has been forgotten in this thread.

 

I just dont like the idea of spending money that I dont have

the world would be a much better place if governments listened to your advice ...

 

We as workers/employees are at the mercy of the employer.

that's true ... but we as workers/employees can always start our business and set our own rules, instead of submitting to a third party ... that's what I did 29 years ago, and I've never regretted a single day of it.

 

@JoeJester Good point but I have never had a credit card. Ever. In my opinion those things are poison! I know that if you pay them off quickly then they can be good bla bla bla but I just dont like the idea of spending money that I dont have.

Staying away from them is never a bad thing. They can be useful, but only if managed well and you avoid the Siren Song they bring. Lot's and lots of studies have shown that people -- even people that pay them off religiously every month -- pay significantly more when using credit cards than when paying cash. It's difficult to avoid it. In my case I don't think I pay much more on a single purchase than I would if paying cash, but I know I hit the fast food places more often than I did when I carried cash.

The thing that really helped me stay in check was (back in '95 to '97, so different world) I paid for EVERYTHING with a check. I also started off each month flat broke and so any check I wrote during the month was immediately into overdraft at 18%. Made me REALLY insist that every purchase be unavoidable. Also let me pay of $40k of debt in two years making $42k/year.

@WBahn I see what your saying but then by that logic it does not matter if you are paid weekly or yearly. In my opinion, small budgets are easier to handle than big ones Plus there is a massive moral boost in getting paid weekly! I only ever had two jobs that both paid monthly and there was no drive for me to do those jobs either way. This new job though, every Friday is payday and that feeling is fantastic (you work hard the whole week, you get rewarded then and there instead of waiting 3 extra weeks).

I suppose I am saying that weekly pay feels better.

I guess I've been lucky in that I have very seldom ever had to emotionally tie my work to the pay. I've certainly worked "menial" jobs, be it janitorial or restaurant work, where the only reason I had the job was because it included a paycheck. But even then I didn't spend time at work thinking about how it was only leading to a paycheck in X days. Perhaps that's because I knew that whether I was getting paid for the work and when I was getting paid for the work were two different things and since the first was a given, the latter wasn't much of a concern. But I think more it is that I've always been able to get into my work, even if it was scrubbing pots and pans, and focus on doing the job well so that the pay was, in some respects, a separate thing entirely. So I can't relate to what you are describing.

When I was really living hand to mouth as an undergrad trying to make it on the $300/mo VA benefits (no tuition assistance or anything else, the entire benefit was $300/mo max) I worked at a Burger King. If I could have, I would have aligned my pay to when the rent was due because I couldn't always count on myself to make sure that there was enough money in my account to cover the rent check when it was due. But then, when necessary, I didn't need to buy groceries since a benefit of working fast food are free (and OH so nutritious!) meals. One month, as an experiment, I didn't eat anything except at Burger King. I asked the manager to not schedule me for more than one day off at a time, which she did. I made it through the month eating two meals only on the days I worked -- one before and one after my shift (which many fast food managers used to allow since the actual cost of the food is lost in the usual waste in the industry). It wasn't fun, but it was doable.

But, years later, after I paid off my first house and realized that my total housing costs were $250/mo (including utilities, taxes, and insurance but not including saving for outyear maintenance like the roof) that, if push came to shove, I could readily maintain my standard of living working minimum wage (which was $5.15/hr at the time) since a full-time gig would get me right at $800/mo take home and that I could get by on the kind of part-time fast food gig if I had to because of the meals included. That realization removed what little job-related insecurity I might have had. Of course, I was young enough at the time that the thought of ending up in a situation in which the reason I needed income was because of disability didn't cross my mind. Now it does.

 

@JoeJester Good point but I have never had a credit card. Ever. In my opinion those things are poison! I know that if you pay them off quickly then they can be good bla bla bla but I just dont like the idea of spending money that I dont have.
@WBahn I see what your saying but then by that logic it does not matter if you are paid weekly or yearly. In my opinion, small budgets are easier to handle than big ones Plus there is a massive moral boost in getting paid weekly! I only ever had two jobs that both paid monthly and there was no drive for me to do those jobs either way. This new job though, every Friday is payday and that feeling is fantastic (you work hard the whole week, you get rewarded then and there instead of waiting 3 extra weeks).

I suppose I am saying that weekly pay feels better.

Robin,
I learned a long time ago to save some of my earnings. As I was growing up my parents taught me to save.
The first job I had was selling newspapers on the street for 5 cents, and that is when I started saving.
I still save money to this day, so when I use a credit card I am not spending money I don"t have
Ned

 

You said it!

The amount of daily stress that simply disappears when you know you are not living hand to mouth is enormous. Even if you are spending everything you make (which is not good in the long run, of course), if you are spending what you made three months ago and not three weeks ago, you have enormous peace of mind. A bill comes in and you just pay it. You don't have to calculate how many days the payment will take to post and whether or not the due date falls on a weekend or whether you need to hold off putting gas in the car, you just pay the damn bill and move on.

So true ... I normally get 4 or 5 paychecks a year ... and what I do is I always pay all of my yearly rent, insurance and other fixed costs of next year in one big sweep when I earn enough money... it is then that I can relax and plan for the future.

After quitting my last vessel (I was an employee in a payroll) , 27 years ago, I started to work as independent surveyor. I get paid, I do not know how many times a year, depending of the amount of work done for every client and their will/disposition to pay soon or later (and I mean, sometimes, years later!!).

In spite of my lack of experience something told me to keep, from the very start, always some $$$ handy and available with no restrictions. Here we call that, a "colchón" (mattress) but in an electronics related forum, buffer would be a suitable name. In spite of the so many drought periods I experienced, I managed to handle it without really suffering. Twice in 27 years I had to borrow some money for few days. In my job, I need to hire, frequently and in a more or less regular basis, surveyors to do some jobs. Their invoices, taxes and services have absolute priority, so, when I decide to buy something to myself I am deadly sure I owe nothing to anyone and I am spending my money. Peace of mind, you say? Sure. It is part of my life.

If from the above you think I am a rich guy, please consider better, a well organized, realist person (*)

Having lived 71++ with no credit card (had to ask my ex, recently, how they are used), and paid everything cash in the last 40++ years proved myself that I am doing right. It took me years to learn that those famous minimum credit card payments were a disastrous thing instead of what I deemed a wise handling of a debt. Go figure!!! I admired people carrying maybe 4, 6 or 8 credit cards. How wrong I was.

(*) Could be farting, but around here, there is the most basic of all basic principles in these matters, expressed as: not sh+++ing higher than your ass. Enough said.

In 20 days, the dealer will call me to receive my new Toyota ETIOS XLS SP.

 

I have never had a credit card. Ever. In my opinion those things are poison! I know that if you pay them off quickly then they can be good bla bla bla but I just dont like the idea of spending money that I dont have.

There's nothing inherently bad about having credit cards. They only cause problems if you don't use them properly. The credit bureaus actually reduce your FICO score if you don't have the number consider "good/excellent".

I think the recommended cash reserves you're supposed to have is 6 months living expenses. If you build that financial buffer, you shouldn't have to worry about the majority of financial surprises. It might even tide you over if you get laid off.

 

Could someone please explain to me why would anyone want their salary paid weekly, instead of monthly?

I think the more appropriate question would be, "Why would anyone want their salary paid monthly, instead of weekly?" Why wouldn't you want to enjoy the earning power of your money, instead of letting your employer enjoy the earning power of your money?

 

Good point but I have never had a credit card. Ever. In my opinion those things are poison! I know that if you pay them off quickly then they can be good bla bla bla but I just dont like the idea of spending money that I dont have..

Credit cards are nothing more than tools. I have had a credit card for over 40 years and I have rarely carried a balance. It's not spending money that I don't have, but spending money that I have in a convienent format - I don't have to carry around much cash, or a check book - just a card. At the end of the month, I pay the CCC the balance in full (they hate people like me - they don't get to reap their usuary levels of interest charges).

 

Credit cards are nothing more than tools. I have had a credit card for over 40 years and I have rarely carried a balance. It's not spending money that I don't have, but spending money that I have in a convienent format - I don't have to carry around much cash, or a check book - just a card. At the end of the month, I pay the CCC the balance in full (they hate people like me - they don't get to reap their usuary levels of interest charges).

Actually, they love you pretty well, too.

Consider two people that each have a credit card with a limit of $1000. To keep the numbers easy, let's say that they are paying 18% on balances and have a minimum monthly payment of 2% of the outstanding balance, which is pretty common.

Merchants are charged a processing fee on every purchase. The pricing is all over the place, but average about 2% for swiped transactions and 2.5% for non-swiped (like online) transactions. We'll assume out two folks pay only swiped transactions at the 2%.

Person A maxes their cards and then makes minimum payments after that, but immediately goes out and then maxes out their cards again. There was a time, in my youth, that this described me to a T.

So in the first month (assuming they went on a binge with the new card, which is sadly not that uncommon). Person A racked up $1000 in charges and the merchant paid $20 while the person paid something less than $15 in interest (since their purchases were spread out over the month). Their minimum payment is $20, so going forward the credit card company, each month, gets $15 from Person A in interest and $0.40 in merchant fees. So they get $15.40 in ongoing revenue each month from Person A.

Person B charges $1000 on their card every month and pays it off within the grace period and so makes no interest payments. But the credit card company gets $20 in merchant fees every month. So the person paying off their card every month is actually producing nearly 30% more revenue than the person that maxes out their card and only pays the minimum payment.

But there are a couple of other factors, as well.

First, the merchant fees aren't that simple. For one thing, the basic fee consists of two parts, a percentage of sale that is about 1.6% and a per transaction fee that is about $0.10. The average transaction size is around $25, which equates to a total of 2%. But smaller transactions drive the effective rate up. Buy that $1 candy bar with your card and the merchant pays 11.6%. There are other costs involved so the amount the credit card companies and processors make is probably higher than this by a small amount, but the same principle applies since most of these additional costs are independent of how people use the card.

Second, the CC issuers are very aware that people that max out their cards and make minimum payments are MUCH higher credit risks and a significantly higher fraction of them will end up declaring bankruptcy, at which point the company loses the entire balance (they seldom get anything). The person that pays of their card every month, on the other hand, has a much lower chance of going bankrupt. As a result, people that are always maxed out do not get the increased credit limits that the pay-off-in-full crowd get. So while Person A might eventually get their limit up to, say, $2000, Person B has probably had their limit raised to over $10,000 in the same amount of time (if they ask). So Person A is now paying interest on $2000 and churning $40 through their out each month, while Person B is churning perhaps $4000 a month through theirs.

Having said all that, the CC companies also know that the max-out-and-pay-min crowd are far more likely to overcharge their account and make late payments. So they really do milk them on those fees -- not to mention then jacking up their rates to nearly (or sometimes over) 30% APR.

So the CC company doesn't really care whether you are Person A or Person B -- they've set up the system so that they will make out just find regardless. What they hate are the people that have credit card accounts and then don't use the card at all -- they just have it to occasionally do transactions that are very difficult to do with cash, such as rental car and hotel reservations and for emergencies. So they can get pretty aggressive about closing accounts that haven't been used in a certain amount of time, typically one or two years.

 

I think the more appropriate question would be, "Why would anyone want their salary paid monthly, instead of weekly?" Why wouldn't you want to enjoy the earning power of your money, instead of letting your employer enjoy the earning power of your money?

Philosophically, that's very true. Unfortunately, most people simply don't handle money well (just look at the amount of consumer debt out there). Payday lenders do a very disproportionate amount of their business with people that are paid weekly. A big factor in that is that they spent the money they got each week when there wasn't a monthly bill due before the next paycheck and then, when one is, they don't have the money. What has always amazed me is that many of these folks don't learn from having done that and they do it again, and again, and a again for years on end. The payday lenders are charging anywhere from 300% to 800% interest and have no shortage of customers.

 

There's nothing inherently bad about having credit cards. They only cause problems if you don't use them properly.

Sadly, most people (even those that pay them off in full each month) don't use them properly. Most people (not all) spend more on a significant fraction of their transactions if they are paying with a credit card. Several studies, including ones by companies such as Dun and Bradstreet, indicate that people spend between 15% and 20% more, on average, when paying with a credit card versus paying with cash. Given may transactions are largely immune to such things -- the doctor's copay or the gas to fill your tank -- the actual increase is quite a bit more. McDonald's, for instance, reports that their average credit card tab is $7 while their average cash tab is $4.5. Of course, nothing is that simple and this doesn't mean that people paying with a credit card buy half again as much food than if they paid with cash. For one thing (although it is becoming less the case), people are more less likely to use a credit card for small purchases, so someone just buying a drink will probably pay cash thus lowering cash average while someone making a large order for a large group (or paying for a group of people and collecting the cash from the individuals) is more likely to pay with a credit card thus raising the credit average.

But I think it is a reasonable claim that in the overwhelming majority of cases, people using a credit card are significantly more likely to base their purchasing decisions on what they want at that moment over what they can afford, while people that make most or all purchases with cash are more likely to always keep what they can afford closer to the front of their decision making process.

If nothing else, cash is a great stick-to-the-budget tool. If you decide that you are going to spend $10/day for meals and each morning you leave with a $10 bill in your pocket (and no credit cards), it's pretty much guaranteed (short of mooching off friends or something like that) that you will honor the limit. If you just tell yourself that you will only spend $10/day on meals but have the credit cards on you and no cash, it is a lot harder to stick to that plan and a lot easier to fall prey to things like, "Well, I spent $7 for lunch, but I'm really hungry so I'll hit Arby's for dinner and make up for it tomorrow."

The credit bureaus actually reduce your FICO score if you don't have the number consider "good/excellent".

Yes and no. Their credit scoring model is so convoluted that it's hard to tell -- which is the way they want it.

But I think this is a pretty small factor, at least provided you have others reporting on your payment history such as a mortgage or landlord, utility companies, car loans, etc.

We have been doing the "buy as much as possible on credit card" approach for years and years (probably about twenty years now) and I'd say we average somewhere around $1000 a year in cashback rewards. That's hard to give up. But the real question is whether using credit cards results in us spending more than that a year in purchases that we wouldn't otherwise have made. I think that it is a very real possibility, just in fast food alone. With a typical fast food bill being something like $7 to $10 for on person, it doesn't take many avoidable stops to eat up all those rewards.

So we are considering going cash-only, probably with some well laid out, in writing, exceptions such as fuel purchases (we get a 5% cashback on that and they aren't subject to impulse buying).

We now have a debit card and we may start using that for planned purchases and cash for everything else. It'll be interesting to see the results.

 

Several studies, including ones by companies such as Dun and Bradstreet, indicate that people spend between 15% and 20% more, on average, when paying with a credit card versus paying with cash.

I never consider payment method when I make purchases. Regardless of how I pay, the money still comes from the same source.

I typically have one credit card in my wallet and my usual "walking around" money. If a purchase is around $20 , I typically pay cash; otherwise I use a credit card. For planned purchases above what cash I usually have on me, I carry a second card in case there's an issue with the first.

I was once in a restaurant with my Sister's family, 8 of us all together. When the check came, I gave the server a credit card. When she pointed out they were cash only, I gave her cash. It wasn't a big deal; I just needed to replenish my "walking around" money.

 

@JoeJester I have never had a credit card. Ever. In my opinion those things are poison! I know that if you pay them off quickly then they can be good bla bla bla but I just dont like the idea of spending money that I don't have.

I have always used them in my favour, but you have to have the discipline to pay it off without interest when due, first a credit card gives you up to 30 days free credit, and now if you shop around you also get a nice discount on all purchases.
Plus if you keep the payment due in a savings account it also adds up.
IOW you make them work FOR you.!
I hate credit/loan payments with a passion and the Odd time I have taken advantage of it, I have payed it off well before the loan period end date.
It is Extremely rare that I use cash anymore.
Max.
.

 

I never consider payment method when I make purchases. Regardless of how I pay, the money still comes from the same source.

Neither do virtually all of the people that purchase more when they pay with a credit card compared to cash. It's a subconscious consideration. Hardly anyone goes, "Oh, I'll get the large fries because I'm paying with a credit card." But a higher fraction of people get large fries when paying with a credit card than when paying with cash.

Studies have also consistently shown that people tip more when paying with credit card than when paying with cash and are more likely to "buy a round" or "pick up the tab" for others when paying with a credit card versus paying with cash -- but hardly any of those people would say that the use of a credit card affected their decision.

That does not mean that there aren't people that truly don't spend any more when paying with credit than when paying with cash -- there certainly are. But most people that believe that they fall in that category actually don't. It's similar to how a strong majority of people believe they are above the median in almost any thing they are asked about.

 

I think the more appropriate question would be, "Why would anyone want their salary paid monthly, instead of weekly?" Why wouldn't you want to enjoy the earning power of your money, instead of letting your employer enjoy the earning power of your money?

When your employer, in my case, the U.S. government, only sends out retiree checks once per month, you deal with it. Even when I was active, we were paid only twice a month, the first and fifteenth. The last time I was paid weekly was in high school when I worked at a radio station.

The employer sets the pay period. Even at weekly periods, you can still see some at the instant loan vendors paying off last weeks loan and getting this weeks loan.

Plan out your finances irregardless of your pay period.