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Ramsey is mostly for people with spending problems. If you don't upgrade your purchase or buy thing beyond what you would pay cash for then credit cards are just an alternative form of cash. In many cases credit is less expensive than cash but you can always pay cash if their is a deep enough discount. I like having options rather than limiting myself to a cash only policy.
A lot of Ramseyites will cite the McDonalds Study where they say people spend more when paying with credit. I am sure there are some people that do but IMO the study just shows people are more likely to pay with credit card the higher the ring total. By myself with a $7 ring total I am paying with cash. With a family of 4 and a ring total of $25 I am more likely to pay with credit card.
I had relatives who tried to use a debit card to rent a SUV at Hertz and they would not rent to them without a huge cash deposit. They also did a check of their credit (FICO SCORE). This would not have happened to them if they had a regular credit card.
And many a hotel will place a $500+ hold on a card at check-in as a guarantee of payment and damage deposit. With a credit card that's got a high limit, it's no big deal if that hold lingers for a while. I never notice them. If it takes a week for them to take the hold for that large sum off a debit card, that can start to annoy to cause trouble.
Plus, as I said before, cheap supplemental car rental insurance. We save probably $80-$200 per rental using the Amex version of CDW/Super Cover.
Ramsey is mostly for people with spending problems that can't trust themselves with having more credit than available cash. If a person can admit that to themselves then I think it's great that they found a program that works for them. For those who use credit as an alternative form of cash (ie. they have the savings plus healthy reserves to cover purchases before even thinking about making them) there is not much need to become a Ramseyite.
Where I have the problem with Ramseyites is many tend to get stuck in the cash only is the right policy for everyone which is flat out wrong.
You do not have to upgrade your purchases or spend beyond what you would normally pay in cash. Treat it the same as cash and you will be fine.
Ramsey is mostly for people with spending problems that can't trust themselves with having more credit than available cash. If a person can admit that to themselves then I think it's great that they found a program that works for them. For those who use credit as an alternative form of cash (ie. they have the savings plus healthy reserves to cover purchases before even thinking about making them) there is not much need to become a Ramseyite.
Where I have the problem with Ramseyites is many tend to get stuck in the cash only is the right policy for everyone which is flat out wrong.
You do not have to upgrade your purchases or spend beyond what you would normally pay in cash. Treat it the same as cash and you will be fine.
I did used to think of credit cards as a place to turn when I wanted or 'needed' something and didn't want to wait. Probably how most people do. It's hard to fathom that now, though. But to echo everyone else, yeah his advice is for people in the other camp.
I put everything on the card even $7 ff meal. Helps me track spending. Cash goes *poof* that way and I always 100% believe that I lost some. That makes me nuts, so forget it.
If I wonder for a second where my money went now I look online and go oh yeah ...........I see.
Credit Cards are fine...just another form of payment. I use debit and cash only...because of the simplicity of it. We generally do our best not to spend money...the points wouldn't add up to much.
You know what's funny at the grocery store I don't have a clue how much my total is going to be until I hit the checkout line. At that point cash or card hasn't even entered into the equation
Yeah, the big difference at the grocery store for me isn't cash versus credit card, it's shopping off of a list (and possibly using coupons) versus shopping without a list. And shopping when full versus shopping while hungry. Shopping after lunch or dinner rather than before, and keeping my grocery shopping list on my iPhone so I always have it with me are what keeps me from putting impulse buys in my cart.
I'm more likely to spend compulsively if I use cash.
Sure, if you have a $100 in cash you can spend it all. If you have a card with a limit of $5,000 you could spend $120. Cash limits you to money you actually have.
PS, i'm not against credit cards, but I also realize that for the vast majority of people, they are not a wealth building tool. They are issued because they make $ for the issuer, not because they make money for the issuee (in MOST cases)
On the surface this is really not that difficult. Decide what you want to do for long-term (retirement, kids' college) savings and sock that away first. Spend the rest (but not more!) however you see fit. Some of it might temporarily go into savings for buying something bigger like a car or a vacation, of course. As long as I'm spending no more than my take-home over the long run there is (IMO) absolutely nothing wrong with using cards. Over the years I've even taken on a few cards (not all at once) for the promo points. Typically those points are worth $500-$1000. Those cards come with an annual fee, and I'll cancel before the first year unless there is some other benefit that offsets the fee.
You know what's funny at the grocery store I don't have a clue how much my total is going to be until I hit the checkout line. At that point cash or card hasn't even entered into the equation
I remember as a kid back in the 70's shoppers used to have these clicky things to keep track of the amount in your carts.
I try to shop with a list at the grocery store but often get side tracked if something is marked down. Overall it all balances out as I tend to buy the same things over and over. Sometimes they are on sale and sometimes they aren't.
My wife and I spend about $2000 a month on our Cash Back Credit Card. We use the Fidelity Visa Card which puts two dollars in our Fidelity account for every hundred dollars we spend on the card. So at the end of a typical year we get about $480 to invest in the stock and bond market.
But if you listen to Dave Ramsey he thinks we are wasting our time and should only use cash and a debit card. He says the $480 cash back is a waste of our time and we will spend more because it is so easy to charge and likely pay interest.
I never pay interest and only spend money on things we would pay cash for. But he may have a point with many people who abuse their credit cards.
What are your thoughts? Do you agree with Dave Ramsey about credit cards being evil for most people, even if they pay 2% cash back?
I think that the advice is good for those who tend to overestimate their level of financial discipline - in other words, people who think they can control themselves but can't.
Dave Ramsey makes the false claim that in order to get a good credit score, you have to pay $100,000 in interest. I have no idea whether he really believes this or not, but it is still false.
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