Dave Ramsey and Credit Cards

Dave Ramsey is a finance guru with a Bachelor of Science degree in Finance and Real Estate. He ended up in debt for $1.2 million in 1987 and in 1988 he filed for bankruptcy.  Now in 2021 he has a net worth of 200 million dollars by helping tons of people getting out of debt.  So obviously he is doing something right.  First off I want to say that I am not going to go off on him.  I am also not going to say that I or my wife know more than Dave Ramsey about finances.  As talked about before we do watch his show, however he is a little out of touch when it comes to credit cards and rewards.  Specially when he has quotes such as

“I never met a millionaire who said, ‘I made all my money with airline miles.’  Rich people don’t fall for stupid credit card tricks.”

Dave Ramsey’s distaste for credit cards has a good reason, as there are a-lot of irresponsible people out there with their money and credit cards.  In fact according to Lending Tree, 53% of active credit card accounts carried a balance at some point in the 4th quarter of 2020.  You wouldn’t give an alcoholic a drink right?  But what about all the people who can drink responsibly?  The ones that know the importance of only using your credit card for what you can afford?  That will pay it off in full each billing cycle.

He is all about using cash and your debit card.  He is notorious for saying “Debt is DUMB. Cash is KING.  A debit card will do everything that a credit card can do, EXCEPT putting you into debt.”

Debt is DUMB. Cash is KING.

Cash can be king, we have saved lots of money by using cash instead of our credit card.  We always ask if there is a charge for using a credit card.  If there is a fee, we will use cash or write a check (depending on the amount).  However if the price is the same, we will gladly get our cash back by using our credit card.  And I am sure the places that don’t charge a fee to use cards have raised the cost of their products and services due to the fees they incur to accept credit cards.  But credit cards are not going anywhere, and I might as well get the cash back with my plastic if the cost will be the same.

A debit card will do everything that a credit card can do.

Not exactly true…  Years ago I paid for everything with cash as I didn’t have a credit card.  It is not easy to get a hotel room, they often will ask for a large cash deposit.  Or they will put a larger hold on your funds in your bank account through your debit card.  Now if you’re a multi millionaire like Dave Ramsey that is like change for you.  Or how about renting a car?  Sure debit cards are accepted now more than they once were.  However there usually is a list of requirements.  Let’s not forget that the last I checked, my debit card does not give me up to 5% cash back.

I never met a millionaire who said, “I made all my money with airline miles” Rich people don’t fall for stupid credit card tricks.

Sure you will not get rich earning 5%. However a responsible credit card user can make around $1000 a year in cash back rewards.  If you take that extra money and invest it every year, along with the “8th wonder of the world,” Compound Interest with an estimated 8% return you could turn that into about $55,000 of FREE MONEY in 20 years.

I want to close out by saying that with all that being said, I do not encourage you to use plastic at all if you don’t trust yourself.  Be Smart!!!