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No emergency savings? Don't use your stimulus check to pay off credit card debt, says this financial expert

Stimulus checks are starting to hit bank accounts this week. Tiffany "The Budgetnista" Aliche advises most people against using stimulus checks for credit card debt unless you've got your basic expenses covered for 6 months.

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The Chase Slate® is not currently available to new cardholders. Please visit our list of the best balance transfer cards and best Chase cards for alternative options.

If you have competing financial priorities right now, from paying for groceries to managing a mortgage and credit card debt, it may be hard to decide the best way to use your stimulus check.

While a stimulus check worth up to $1,200 (or more if you have kids) can make a sizable dent in your credit card debt, that should be your last priority, according to Tiffany Aliche, financial educator and founder of The Budgetista.

In normal times, Aliche advises to prioritize paying off credit card debt. But "not during recession times because you don't know when your next dollar is going to come necessarily," Aliche says. If you are recently laid off, unemployed or furloughed, she recommends making the minimum payments on your credit card(s) and putting your extra stimulus money in savings.

Once you have six months or more of expenses saved and have a stable job, you can be a little more aggressive towards your debt, according to Aliche.

Below, CNBC Select reviews how you should spend your stimulus check and the best practices for using credit cards to finance new purchases or debt.

How to use your stimulus check to build an emergency savings

When planning how to spend your stimulus check, Aliche suggests you first put money toward essentials, which may include groceries, medical expenses and other necessary purchases. 

Then you can save, "because savings in a time like this is going to be critical," Aliche says.

What's the exact amount of cash you should aim to have saved up during a recession according to Aliche? It may be lower than you think. 

"Ideally you want to have six months of 'noodle budget' expenses saved," she explains. 

A "noodle budget" is what Aliche calls an emergency savings that's modified to include only essential expenses during uncertain financial times. "Your noodle budget is if you had to eat ramen noodles, if you had to live off just the bare-bones essentials, only the essentials — so, no cable, no nails, no hair, no entertainment — just temporarily while you look for a job," Aliche says.

So if your expenses normally total $5,000 a month, but your "noodle budget" really is $4,000, save six months worth of your "noodle budget." That would mean saving $24,000 versus $30,000 "because the assumption is that if you lose your job you should be dropping down to your noodle budget anyway and then living off that savings," Aliche explains.

While many financial experts recommend saving between three to six months of expenses, "during recessionary times, you definitely want to have six months," Aliches says.

It's important to have emergency savings in case unexpected expenses arise, such as your water heater or fridge breaking. Without savings, you may wind up charging repairs to your credit card, which probably come with high interest charges unless you qualify for a 0% APR credit card, which we explain below.

"You don't want your credit card, if you can avoid it, to be your emergency savings account because [the bank is] going to charge you a fee for the money you borrow from them," Aliche says. "Whereas if you actually had an emergency savings account you can get your money for free, because it's your money."

How 0% APR cards and forbearance programs could help

If you plan on putting your $1,200 stimulus check into emergency savings but have little leftover to pay off credit card debt and buy essential supplies, a 0% APR credit card can provide a temporary solution to hold you over. But if you use one, you should intend to buy only what you need and have a long-term plan to pay off the balance as soon as possible. 

"The key is if you're going to lean into a credit card you must be living at your noodle budget because it doesn't make sense to be using credit cards to survive and you're still at your regular budget," Aliche says. "You should not have cable on, you should not have any of the non-necessities going."

If you were to open the American Express Cash Magnet® Card, you could receive a 0% APR on essential purchases in your "noodle budget" to hold you over for 15 months during unemployment (then 13.99% to 23.99% variable APR). (See rates and fees for the Cash Magnet card.)

And if you want to avoid the typical 3% balance transfer fee, consider no-fee balance transfer cards, such as the Chase Slate®. The Chase Slate card offers a 0% APR for the first 15 months on purchases and balance transfers (then 14.99% to 23.74% variable APR) with a $0 balance transfer fee on transfers made within 60 days of account opening. After 60 days, the fee is 5% per transfer with a $5 minimum.

Keep in mind, these cards often require good credit or excellent credit (scores 670 and above). If you don't fit in that range, you may want to consider the various relief programs credit card issuers are offering cardholders, which may include waived late fees and the ability to pause monthly payments. Just be aware that you'll likely still accrue interest on your unpaid balances with credit card forbearance programs.

Information about the American Express Cash Magnet® Card and Chase Slate® has been collected independently by Select and has not been reviewed or provided by the issuer of the card prior to publication.

For rates and fees of the American Express Cash Magnet® Card, click here.

Editorial Note: Opinions, analyses, reviews or recommendations expressed in this article are those of the Select editorial staff’s alone, and have not been reviewed, approved or otherwise endorsed by any third party.