The Dave Ramsey Credit Card Philosophy
I know Dave Ramsey and many financial gurus would crucify me for saying this: ‘keep your credit card’. Key emphasis on the singular. Let me explain. The average American household credit card debt is $15,279 as of December 2013 – and the average interest rate runs in the mid- to high teens at any given time. Pretty scary stuff. So let’s just get rid of all those cards, CUT THEM UP!
On the surface that sounds great. And why wouldn’t you listen to Dave Ramsey? Without a doubt, if you have $9,200 in credit card debt, it’s time to cut those credit cards up. Many of us don’t have the composure and fortitude to use credit cards properly. But, it can be done, and using your card properly can be very advantageous. I’ll show you how.
You’re Wrong, Dave Ramsey. How to Use Credit Cards Properly and Reap Financial Reward:
- NEVER, ever carry a balance from one month to the next. If you do, cut the card. If you don’t, you’re never using your own money for anything. The credit card company might hate you, but so be it.
- Use credit cards strategically. There are 5% cashback gas cards and 6% cash back grocery rewards cards.
- Every six months, ask your credit card company for a credit limit increase of a few thousand dollars. You will never need to use these increases, but it will lower your balance to credit limit ratio, which will do wonders for your credit score. On the flip side, canceling longstanding accounts can hurt your credit score. You won’t hear that from Dave Ramsey.
- Find the right card that will give you actual usable perks and read the fine print.
- Only use your card to purchase necessities that you were going to buy anyways. These items include food, heat bills, electric bills, phone bills, and gasoline. This is where the financial haves are separated from the financial have-nots. If having that free pass in your wallet means you don’t hesitate to pull the trigger on luxury items that you don’t need, then a credit card is not for you.
Not to mention, having a credit card also offers the peace of mind that you’re using someone else’s money, and if there were a case of fraud, you could dispute the charges and not be out your life savings. Take it from someone who has had money stolen from my bank account through a debit card – you should not feel safe using a direct debit card at ATM’s, gas stations, or anywhere else, really.
Credit cards can be a great thing if you use them properly. Don’t let Dave Ramsey tell you otherwise.
Update: I recently gave a better version of Dave Ramsey’s baby steps – check it out.
Dave Ramsey Credit Card Discussion:
What’s your take on Dave Ramsey’s view on credit cards? Do you think he is right or a little too dictatorial in his view on credit cards?