Dave Ramsey Hates Credit Cards. Should You Avoid Them?

by Maurie Backman | Published on Oct. 2, 2021

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An older adult using a wheelchair buys things online with a credit card.

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The personal finance guru may warn against using credit cards, but there's more to the story than that.

Dave Ramsey has made a huge name for himself in the personal finance space. So when he talks, people tend to listen. A firm believer in empowering consumers to make smart financial decisions, Ramsey isn't shy about his feelings toward credit cards. In a nutshell, he thinks they're a dangerous tool that can all-too-easily lead consumers to debt.

Is he right? Should you avoid credit cards, or are they safe to use?

What you need to know about credit cards

Ramsey is certainly correct about one thing. Credit cards can be very dangerous.

Because credit card companies don't require you to pay off your entire balance right away, it's easy to fall into a trap where you carry a balance forward month after month, all the while racking up credit card interest on the sum you owe. In fact, that's precisely how credit card companies make their profits -- by collecting interest and imposing other fees (like late payment fees) that cost consumers money.

Not only can carrying a credit card balance cause you to pay more for your purchases than necessary, but it can damage your credit score. One factor that goes into calculating your score is your credit utilization ratio, which measures the amount of available revolving credit you're using at once. The higher your outstanding credit card balances, the higher that ratio is likely to climb, which can drag down your credit score and make it harder to borrow money affordably (or at all) when you need to.

But while credit cards do open the door to misuse and financial damage, they're not all bad. And when used correctly, they can actually help you improve your financial picture.

Many credit cards offer cash back or reward points for the purchases you need to make. So if you routinely pay for groceries, gas, and other essentials, the cash back you collect is free money in your pocket.

Credit cards also offer some degree of consumer protection. If you charge a purchase on a credit card that ends up being defective and your merchant won't refund you, you're not totally out of luck, because you can turn to your credit card company for help in disputing the charge.

Also, credit cards can make it easier to track your spending. When you pay cash for your purchases, it can be tough to remember how much you've laid out. With a credit card, you can log on to your account at any time and see what your balance looks like.

It's these credit card benefits that Dave Ramsey doesn't talk about as much. Understandably, he knows how easy it is to abuse a credit card and tends to discourage consumers from utilizing them. But if you use yours correctly, you might help your personal finances rather than hurt them.

Ground rules for credit card usage

If you're going to use credit cards, whether regularly or on occasion, be sure to stick to these rules:

  1. Never charge more than what you can afford to pay off by the time your bills come due
  2. Always read your credit card agreement so you understand what you're signing up for
  3. Check your credit card balance regularly during the month -- don't just wait for your bill to come due to see what you're on the hook for
  4. Don't apply for too many new credit cards at once, as that can damage your credit score
  5. Don't spend extra money on your credit cards just to rack up cash back or rewards -- in the end, that won't benefit you financially

Sticking to these rules can help you make the most of your credit cards -- even if Dave Ramsey says you're better off avoiding them.

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