Have you heard of Dave Ramsey? I greatly respect the man and what he has done in America in the past decade, but you may be surprised that I do not agree with what he teaches about credit cards. Dave Ramsey has a very simple view when it comes to credit. He wants you to pay them off and cut them up, never to use them ever again. I say that Dave Ramsey is wrong about credit cards.
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Where Dave Has It Right
Our world has grown accustomed to instant gratification and has financed much of their possessions. This has increased the popularity of credit cards and has made Visa and Mastercard very wealthy companies. For those that cannot control their spending, Dave Ramsey is right. They should not have credit cards. It’s better to live a simple, safe life on a debit card than to live every day in debt and getting sunk with interest payments.
Where Dave Has It Wrong
I have been a loyal student of Dave Ramsey’s for the past 3 years or so. In that time, I have increased my net worth by over $100,000, largely because of what I have learned from Dave. Just recently though, I have been reviewing some of the principles that I have learned, and I am beginning to disagree with Dave in regards to credit.
Here are four reasons why I think everyone should have multiple credit cards and use them regularly.
Have you ever had someone charge something on your debit card without your permission? Somehow they got your number and made a fraudulent charge either by phone or online. Depending on your bank, it could be a nightmare to get that money back. If, however, you often use a credit card, you simply tell your credit company that it wasn’t your charge and refuse to pay the bill. Money never comes out of your account and the responsibility is wholly on the credit card agency.
2) Introductory Rewards
Credit companies want your business and are willing to give you a little incentive to have you sign on with them (because they want to charge you interest of course, but you’re going to pay your bill every month right??). I just received a credit card offer in the mail last week. If I spend just $500 in the first three months (I am going to spend well over this amount in tuition anyway), I will earn 20,000 points, which will give me $200 in gift cards. By choosing gas gift cards, I could go about a month and a half without having to pay for gas in my Honda Civic. Sounds like a great deal to me!
3) Continuing Reward Points
This card has no annual fees and it offers rewards points on each purchase, which can then be used for more gift cards. If I continue to stick to my budget and pay my credit card off each week, these reward points are a clear benefit with absolutely no downside.
4) Improving Your Credit
If you never own a credit card, you might not build enough credit to qualify for a home loan, and you might even be turned down for a job when your interviewer checks your credit rating. Whether you like it or not, credit is important and it’s best if you have a couple of open lines and pay them off regularly.
What do you think? Is Dave Ramsey wrong about credit cards? Or do you think it’s an inevitable disaster waiting to happen?
My name is Derek, and I have my Bachelors Degree in Finance from Grand Valley State University. After graduation, I was not able to find a job that fully utilized my degree, but I still had a passion for Finance! So, I decided to focus my passion in the stock market. I studied Cash Flows, Balance Sheets, and Income Statements, put some money into the market and saw a good return on my investment. As satisfying as this was, I still felt that something was missing. I have a passion for Finance, but I also have a passion for people. If you have a willingness to learn, I will continue to teach.