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Forget Dave Ramsey, 5 Ways I’ve Used Credit Cards to Better My Financial Health
The Dave Ramsey Financial 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 with at least one credit card has nearly $9,200 in credit card debt, according to CardWeb.com, 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, 6% cash back grocery rewards cards, and even 2% cash back debit cards like Perkstreet Financial (which Ramsey recommends).
- 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. I’ve used my American Express Blue Preferred card to get 6% cash back on grocery purchases.
- 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. How can anyone feel safe using a direct debit from their bank account for online payments? Credit cards can be a great thing if you use them properly. Don’t let Dave Ramsey tell you otherwise.
Have you found the convenience of using a credit card too hard to resist?
Dave Ramsey 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?
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My name is G.E. Miller and 
What a bunch of crap. You never hear of millionaires talking about how using a credit cards becuase of the 2 cents they save on gas and stuff. How much is your net worth? $20?
To all the credit card company employees commenting on this, please keep lies on your own web site. Lets remember what caused this financial crisis. I seem to remember something about debt in there… Hmm… Debt = Economic Crisis = Let’s Get Credit Cards? Idiots.
It seems that if you can handle credit cards as tools, without carrying debt, then you are in control.
Conversely, if you fall into the camp where you use credit as a substitute for money you do not have, and you build debt, you are the one being used.
It certainly sounds as if YOU are in the first camp. Unfortunately, so many are in the second. The whole nation seems over-leveraged!
I like your take.
Greetings.
I’m late to post, but I’ve been listening to Dave Ramsey’s podcast for a few months now, and I agree almost 100% with everything that’s said. I like the material because it’s simple, straight-forward and makes sense on every level.
Not only that, but the arguments against Dave Ramsey’s philosophy pretty much boils down to “if I can do it, why not?” That’s weak at best. Dave Ramsey’s idea is to get people to focus on building wealth as opposed to (as someone else said) wasting your energy with 2% cashback rewards, etc.
On top of that, using credit is just layers added to your life. Why maintain more complexity to your already complex life by adding more variables you need to keep track of?
As a “right wing Christian”, I guess some think that I don’t think for myself, but again that’s an emotional generalization by people who don’t know any better. How many situations could people avoid by listening to the wisdom of others who have been in a situation and found a way out? Wouldn’t that be better than people having to re-learn the lessons of those before them?
I’m a web developer (so I guess that means I think a LOT, huh?), and I have been learning a lot of lessons from the open source movement. One lesson is the importance of building on other people’s work. If I had to re-write the same routines, functions and classes for every project I did, I would be far less effective than re-using someone’s well written, thoroughly tested code library. I look at it the same way with taking Dave Ramsey’s advice. I don’t have to go through bankruptcy multiple times (or even waste years messing with “cashback percentages”) to know that I don’t need that noise in my life. It’s a waste of time and mental effort, and it keeps you “on the grid”.
I love Jesus and I love keeping my life simple.
How many of you have been a millionaire, lost all of it, proceeded to regain it just to have an estimated net worth of 20 million? Say what you will about his philosophies, but he’s banking on plenty of americans sheer stupidity to buy things that you can’t pay for..
I want to know that net worth of the author. Because I only listen to the advice of millionaires and every millionaire I have asked advice of said to get out of debt and ditch the cards. I you want to be rich you have to do what rich people do, because they know what they are doing. Duh, they are rich.
I just read Daves book and I agree with kyle and Christopher
Have you ever heard of a debit card? It will do accomplish all the reasons you believe having a credit card is better than not having one. Not to mention, unless you opt in to allow your bank to let you overdraft, there is a 0% of you going into debt with it. Kinda simple huh?
2 things to consider when arguing “why credit cards are good”.
1) Credit Ratings are irrelevant if you don’t borrow money. Many of the “pros” of having credit cards is that if you use them correctly, it can increase your credit score. The purpose? – to borrow money. Dave Ramsey’s philosophy is to not borrow money, which makes that argument irrelevant.
2) A published study by Carnegie Mellon, Stanford and MIT proved that our brain experiences more pain when paying with cash vs. credit card. A Dun and Bradstreet study verified this by showing that we spend 12% – 18% more money when using credit cards over cash. So I commend you for getting that 5% cash back with all of your credit card purchases. Too bad it cost you 12% – 18% more in spending to get it.
Use a credit card for the convenience, just don’t try tell yourself you are saving money.
Peace of mind does not come from “using someone else’s money”. Peace of mind comes from being debt free. The premise is wrong, your not using someone else’s money you are paying for it. Credit cards give you a false sense that you are not using your money, so in turn you will spend more. “On average you will spend 12-18% more when making a purchase with a credit card.” (Dunn and Bradstreet study)
“On the flip side, canceling longstanding accounts can hurt your credit score. You won’t hear that from Dave Ramsey.”
I just wanted to add that Dave Ramsey HAS stated that if you pay off old debt that your credit score may fall. His view…who cares! You’re getting out of debt! That’s the goal so that you don’t have to rely on the credit score to borrow money! Just sayin’…
I just heard Dave on the radio the other day counsel a woman to cut up her cards despite the fact that it will hurt her credit score. Who cares about a credit score? A few months ago I purchased internet for my house and they had to do a credit check. Because I don’t have any credit I couldn’t do payments on my equipment. Seriously I didn’t care that I had to pay $100 for the equipment, I planned on paying in full anyway. The bank I use doesn’t even consider your credit score for home loans so why do I need a credit score? I have never had a credit score so from what I have observed from family, friends, and late night television is that it is something you need to try and convince yourself that you are not an idiot for going into so much debt. Look at me guys, I will make payments for the rest of my life to someone else for stuff I can’t remember, but look I have a high credit score!
O man I could go on and on
point 2 and 3- Dave doesn’t worry about the credit score because he wants to keep people out of debt, so these points seem not to stick as arguments against his method.
point 4- Dave links to a 2% cashback debit card on his website, which is higher than the 1-1.5% example given in your article.
point 5- Dave believes that even if you’re using others’ money, you will spend more with plastic than with cash. So even if you’re just paying for the essentials, the temptation to overspend on them and on other things are there.
Sensible sounding advice in your article, but I like the experience driven method of Ramsey. My $.02, thanks for the food for thought
P.S. In his book whose cover you show a picture of, he makes a comment on the security of using a debit card. He asserts that Visa has made it very similar to dispute a debit card transaction as compared to their credit cards.
I see that you have a lot of haters, but I definitely support what you’re saying. I’m taking the Dave Ramsey class right now, and I do think there is merit to it, but it’s more for people with no control… which just happens to be most people. If you spend money like crazy, then his mindset works well, so most people think he’s God, or close to it.
Anyway, I treat my credit card as if it were a debit card, and thus, I get rewards for things I was going to buy anyway, and had the money to buy anyway. This is exactly what you’re saying, and I’m not sure why people are offended… You’re actually trying to help. (Plus, you’re right.) But hey, if they don’t want your help, it’s their loss. On the flip side, there are people out there who are taking your points into account, and so I thank you for your input!
You say he’s just trying to help. I think most of us commenters are thinking if you want to help people in financial trouble why not go help people in financial trouble rather than taking jabs at someone that IS helping people in financial trouble.
I probably owe my marriage to D.R.’s advice. I’m not an irresponsible person, but I did get my financial habits from my parents who were irresponsible financially. I’m not saying that every human lacks the ability to control his/her self with a credit card. I’m saying look at the average U.S. financial statistics and you’ll realize that the majority of people DON’T control themselves.
D.R. is hitting a larger number of targets by targeting out of control spenders than he would if he went after the tiny fraction of people who use their plastic wisely.
But if you’re really into rewards you should check out perkstreet online banking. I got back $800 cash this year.
Man…Dave Ramsey has you all brainwashed.
If you have no self-control, by all means follow his advice to a fault. Just enjoy paying more for auto insurance and many other non-debt related items because you have a poor credit score.
It’s not just about borrowing money, it’s about how you manage your finances as an adult. Not to mention all of the “hang around with millionaires” comments….why not talk to a billionaire about how to use credit? Don’t know any? Start with Trump.
Borrowing someone else’s money is ALWAYS a recipe for disaster. It amazes me how many people don’t get this. Debt is financial slavery. Plain and simple. And credit card company’s wouldn’t make any money if the majority of their customers never carried a balance. They make money based on people’s irresponsibility with money!!
There are a few out there who do a fine job of paying off their debt every month. Good for them. But I will never borrow someone else’s dime ever again. Credit is a scam. Ever since I have followed Dave Ramsey’s plan, I have gotten out of debt, I got money in the bank, my equity has gone up ten fold, and my stress level is much lower knowing that I don’t borrow money. I work hard and pay for everything outright. It’s a good feeling knowing that I don’t ever have to concern myself with borrowing someone else’s money.
Plus, Perkstreet offers 2% cash back on all purchases with your debit card. I’m on track for about $600 cash back this year and I don’t need to borrow anyone’s money to do that!
Dave Ramsey’s advice saved my marriage and took us from six figure debt to seven figure wealth. His advice is solid and seeing that he’s a millionaire, I’ll stick with what he says.
Argue all you want, but you realize that 2% of the average household’s expenses is only going to be about $600 right?
Thankful for my lack of a credit score,
D.
It looks like you got beat up a bit in the comments here, G.E.! But it’s an aggressive post title so I guess that was expected. For what it’s worth, I largely agree with you. I read Total Money Makeover and didn’t find it very helpful (and actually laughable in places), especially as someone without any consumer debt!
Post-college, I didn’t know yet if I could trust myself with credit so I had one credit card that I never touched and used debit for everything. After three years I believed that I had sufficiently trained myself to never spend money I didn’t have, so I switched to using a good cash rewards credit card. 1.5 years out and I have used my credit card perfectly (I actually pay it off several times per month to keep the balance low) and have enjoyed shifting my occasional redeemed rewards to my “Travel” savings account.
I’m not sure about this argument that millionaires don’t worry about getting a few percent back in rewards. I don’t know any millionaires personally, but from reading The Millionaire Next Door I definitely got the impression that real millionaires are frugal. To me, using a rewards credit card (as long as you never carry a balance or are charged any fees) is part of being frugal. I can definitely see that someone else would consider using cash frugal if they know that they can’t be trusted with credit cards.
While I believe that people will spend a bit more on average if they use plastic instead of cash, I also know that there can be anecdotal exceptions. In our budget, the majority of our spending is for fixed expenses and we have caps on spending in every discretionary category. I am so strict with my spending that I really don’t believe using cash would make a difference.
I agree with Dave that for many people credit cards can be damaging and that if you are in consumer debt the best thing you can do is switch to cash or at least debit. I also agree with you and many posters that some people in some stages of life can use credit cards to their advantage and not get “bitten.” I have demonstrated that principle and will continue to practice it – but you better believe if I ever see myself slipping into revolving debt that I will cut myself off from my cards, rewards or no.