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>3) NEVER, EVER, UNDER ANY CIRCUMSTANCE use a debit card for a purchase. Either hit the ATM or use a CC. Never swipe the debit card unless it's life or death. It's an absolute last resort.
Why?
If your CC is compromised, you have 1 month to catch it, dispute it, and it never wipes your cash.
A co worker today was talking about how her debit card was stolen. Used it while on vacation at a gas station a state over and they must have skimmed the number. She couldn't access her checking account until she came in and signed an affidavit saying that the previous transactions(which were fraudulent) were actually not done by her. Apparently, the skimmer made a fake, so it recorded as "swiped" so it had to be her(by their rationale) or she had to swear it wasn't in writing. Fortunately, she could take the hour off from work to do so, but imagine losing access to all cash until you could get to a bank.
When your debit card is compromised, all your cash is at risk until you resolve the issue. With a CC, your "Credit limit" is at risk, and even that won't hit you for 30-60 days. Typically you dispute the charge, and you don't pay a penny until everything is resolved.
Dispute now, pay later with a CC vs Pay now and Dispute later with a debit card.
Both will get resolved ultimately since the protection is about the same these days, but when your debit card gets stolen/cloned, it hurts a lt more to lose access to all cash.
If your CC is compromised, you have 1 month to catch it, dispute it, and it never wipes your cash.
A co worker today was talking about how her debit card was stolen. Used it while on vacation at a gas station a state over and they must have skimmed the number. She couldn't access her checking account until she came in and signed an affidavit saying that the previous transactions(which were fraudulent) were actually not done by her. Apparently, the skimmer made a fake, so it recorded as "swiped" so it had to be her(by their rationale) or she had to swear it wasn't in writing. Fortunately, she could take the hour off from work to do so, but imagine losing access to all cash until you could get to a bank.
When your debit card is compromised, all your cash is at risk until you resolve the issue. With a CC, your "Credit limit" is at risk, and even that won't hit you for 30-60 days. Typically you dispute the charge, and you don't pay a penny until everything is resolved.
Dispute now, pay later with a CC vs Pay now and Dispute later with a debit card.
Both will get resolved ultimately since the protection is about the same these days, but when your debit card gets stolen/cloned, it hurts a lt more to lose access to all cash.
So...the easy answer is to not keep tens of thousands of dollars in your debit account! I keep a couple grand over my expenses for "cushion". My emergency fund is in my credit union account - no debit card access. I love my debit card for small purchases. I use my credit card to get points...and you keep your "big cash" separate. EASY!
And though we hear about it all the time, it is not really that common to get "compromised".
So...the easy answer is to not keep tens of thousands of dollars in your debit account! I keep a couple grand over my expenses for "cushion". My emergency fund is in my credit union account - no debit card access. I love my debit card for small purchases. I use my credit card to get points...and you keep your "big cash" separate. EASY!
And though we hear about it all the time, it is not really that common to get "compromised".
What if it happens on Friday night (or Saturday night if the CU has Saturday hours)? Are you not stuck paying for everything by check (with the associated hassle)?
You're not wrong, I've just personally argued that point enough. For me, it comes down to the following key points.
1) CC"s are meant to be paid off each month. If you can't follow that one rule, ignore all other advice, and focus on getting to the point where you can follow that rule.
2) Responsible credit usage is the most valuable financial tool you have
3) NEVER, EVER, UNDER ANY CIRCUMSTANCE use a debit card for a purchase. Either hit the ATM or use a CC. Never swipe the debit card unless it's life or death. It's an absolute last resort.
4) Taking on debt makes sense with the cost of not having the debt is more expensive. If you come out ahead financially with a 30 year mortgage vs renting, then take the 30 year. Run the number. If you can't run the numbers... you should probably take DR's advice. Or learn to run the numbers since that'll help you significantly more in the long run.
^^ Repped.
All of these points are what Dave Ramsey doesn't understand when he tells his audience to never use a credit card and to get out of the FICO system altogether by not even having a freaking FICO score.
- You are losing a very important leveraging tool (debt) that can help get you to the next level if you use it efficiently.
- You are losing FREE income (cashback) and discounts that are only available via the credit card
- As mentioned, in the case of fraud, your cash is GONE from your debit card until the bank decides to put it back on there. It could be done immediately, or due to various procedures, not so immediately.
- If you order something from a business and don't get it, or it comes back not as ordered, and the merchant refuses to resolve the issue.....you most likely have to sue them. Good luck collecting that judgment. With a credit card, all you have to do is hit the chargeback dispute.
- You are losing out on the 0% interest for 12 - 24 month deals.
Ramsey went broke using debt stupidly back in the late 80's, and ever since then he's been on a crusade against debt (all debt). Debt is like a gun, it is neither good nor bad, it depends on how it's used. Like a gun, if used properly debt can help BUILD and PRESERVE nations....but used improperly, it could DESTROY everything.
It seems it is quite rare for people with underwater mortgages to do anything Ramsey-esque, even though he has a lot of followers. Why don't we hear of people who are upside-down simply working extra jobs, selling stuff, and living on beans and rice so they can aggressively attack the debt until they can simply sell (or refi, or whatever they couldn't do as a result of being underwater) their house the normal way?
Some peoples houses lost 50% of their value. So live off of beans and rice and work extra jobs for over a decade??
All of these points are what Dave Ramsey doesn't understand when he tells his audience to never use a credit card and to get out of the FICO system altogether by not even having a freaking FICO score.
- You are losing a very important leveraging tool (debt) that can help get you to the next level if you use it efficiently.
Odd that you say this while keeping all your savings in CD's.
Odd that you say this while keeping all your savings in CD's.
Which investment tool people use depends on their individual circumstances. If this user is 70 years old they should not have too much of their savings in equities for instance..
Ramsey's advice is good for people with middle or high middle incomes who for whatever reason racked up a lot of debt.
I used his method for a year to accelerate paying off my car. It was psychologically satisfying.
If you don't make at least middle class money money, he has no help for you. I was listening to his show one time and a woman called in asking how she could save on $9 an hour. She was a single mom un her 30s working as a nurses assistant or something. It was a sad episode. She was struggling, sounded like she was in tears, and Ramsey himself sounded apologetic that he couldn't help her. He didn't say it but the only answer was to make more money.
The people Ramsey can help have family incomes of at least 60-70k.
2) Responsible credit usage is the most valuable financial tool you have
3) NEVER, EVER, UNDER ANY CIRCUMSTANCE use a debit card for a purchase. Either hit the ATM or use a CC. Never swipe the debit card unless it's life or death. It's an absolute last resort.
.
The best analogy I've found is comparing his teaching's to Physical Health. No, DR will never get you ready to run a marathon. If you follow his advise, you probably will never come close to being able to do it. But he will definitely stop you from being that overweight person who can't get up of the couch. He'll keep you mostly healthy and will give you some advice that if you follow, you'll be able to live the rest of your life in some sort of comfort.
When you come to a place like the CD Personal Finance forum, you will encounter a lot of people who can give you much more useful and personal advice. It won't always be one size fits all, but it will usually be better. DR goes the other way, he goes mass appeal. "Mass" is the opposite of "Personal" and it shouldn't be a surprise that there are a lot of people who disagree.
That said, for people who don't come to a personal finance message board, I can't argue that DR doesn't at a minimum get them going in the right direction.
Is North-East ok if you're trying not to go South? Probably. North would be better, but at least they aren't going south. That's how DR's advice works. It's never optimal. He's almost always less than ideal.
But it's hard to argue that he doesn't at least aim those south-bound people in the right general direction.
This may be true but if he is going to offer general advice then why not at least make it good general advice?
Cases in point: 1) DR says invest in 25% each of Growth, Growth & Income, Aggressive Growth, and International mutual funds. Why no bonds? Why not index funds? This isn't optimal and this advice is always accompanied by "seek professional help" which coincidentally gives DR a kickback. 2) 12% expected return. This is a well documented issue but why not just give better, more realistic advice? 3) Front load fees are ok. What?!?! Why?!?! This is just bad advice that again seems to point to DR leaning on the option that gives him the most kickback.
Furthermore, at what point is enough enough for DR? Buy his book(s), then pay to see a live show, buy some more books from his "personalities", pay for his online budgeting software, go see an ELP that gives him a kickback, etc, etc. Who is DR really looking out for, you or him?
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