With over 7 million daily listeners to his syndicated radio show, over 1 million people through his financial class FPU, and 20+ years of helping people pay off debt and build wealth, Dave Ramsey has proven he knows a thing or two about personal finance.
Anytime you grow into a position of authority on a particular subject there will be critics that come along to question your teaching. Such is the case with Ramsey. On numerous occasions he is questioned on his beliefs of investing, insurance, debt, and a host of other topics.
But if you listen to his show, or go to one of his live events, or even take his class FPU, you’ll find one lesson he passionately teaches.
Cut Up Your Credit Cards!
In a world that is rapidly becoming a cash-less society and devoted to plastic, this leads us to a very important question.
Is Dave Ramsey Right About Credit Cards?
If credit cards are as bad as Dave makes them out to be, then surely they wouldn’t exist, right? There are actually quite a few benefits to using credit cards over cash.
Benefits of Credit Cards
- Convenience – You don’t have to remember to go to the bank to get cash. A card fits nicely in your wallet.
- Trackable – There is a digital log of your transactions that’s always accessible online. It’s super easy to track your spending this way.
- Rewards – The credit card company will give you rewards like airline miles, vacations, and other free stuff.
- Protected – If my wallet is stolen I can call and cancel the cards without losing any money.
- Fun – You can even get a picture of your dog on your card!
All of those things sound awesome! Why wouldn’t you use a credit card? If there are positives, there must be a list of negatives.
Negatives of Credit Cards
- Fees & Interest – The credit card companies made $412 Billion last year in fees & interest. You think you’ll pay them off every month, but clearly most aren’t.
- Risk of Debt – What if you lose a job or have a major emergency? You’ll probably use the cash in your checking account to live rather than pay off last months credit card bill.
- You spend more – Both a study done by MIT and one done by McDonalds show that you spend up to 47% more when using plastic over cash.
- Theft – You thought your card was secure when you swiped it at Target, but now thieves have all your digital information after the security breach in December. If they steal cash from you, that’s all they got.
- Collections – Credit card companies become relentless in trying to get money when you don’t pay them on time. They break debt collection laws all the time.
- Lawsuits – If they’re unable to collect from you, they will sue you to get a judgement and then garnish your wages until you’ve paid them in full for the balance, interest, collection & attorney fees.
So, Is Dave Ramsey Right About Credit Cards?
In reviewing this list of pros and cons I have to say he is absolutely correct. The list of benefits are all convenience related. You’ll never hear a millionaire say they made all of their money off reward points. The list of negatives can be catastrophic to your financial health, your mental health and even your family .
So if you’re wondering if Dave Ramsey is right about credit cards… yup.
Question: Do you think it’s possible to use credit cards responsibly? Leave your thoughts in the comments.
Want to get out of credit card debt, live on a budget, build wealth, or make a difference in the world? You’ll definitely want to check out my new money class, Impact University!