Dave Ramsey Says Life Is Better Without Credit Cards -- but Here Are 5 Reasons Why It's Actually Worse

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KEY POINTS

  • Dave Ramsey thinks you shouldn't have any credit cards because life is better without them.
  • In reality, not having credit cards is going to make your life more difficult.
  • There are a few key reasons why you'll have to deal with extra hassle if you don't have credit cards, including not having purchase protection or an easy way to build credit. 

Don't miss out on these cardholder benefits by following bad advice.

Finance expert Dave Ramsey does not believe you should have any credit cards. In fact, he has said, "Plain and simple: Life is better without credit cards," and advised that his recommended number of cards is zero. 

Unfortunately, Ramsey is unequivocally wrong on this. Life is not better without credit cards. It is demonstrably worse for five very important reasons. 

1. You won't earn rewards for everyday purchases

If you don't use credit cards, you likely won't earn any rewards for spending, or the rewards you earn will be minimal if you have a rewards debit card. Rewards credit cards, on the other hand, routinely offer as much as 1% to 5% cash back on certain categories of purchases.  

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This means if you opt not to use your cards, you'll effectively make everything around 1% to 5% more expensive than it would be if you were getting some of your money back in the form of rewards. You'll also be subsidizing the credit card rewards everyone else gets, since merchants price their products with the understanding most people will use credit cards so they'll pay a processing fee on transactions. 

If you pay off your credit cards in full each month -- which you should absolutely commit to doing -- you'll pay $0 in interest and get money back for things you have to buy anyway. Passing up that chance makes your life worse, no question. 

2. It will be harder to build credit

Ramsey does not believe you should care about good credit. He's wrong. A good credit score helps you pay less for insurance, enables you to more easily rent an apartment, and allows you to borrow from a wide choice of lenders at affordable rates when you need to. And you most likely will need to borrow at some point, whether that's to buy a house, buy a car, or get a loan to start a business. 

Credit cards are an easy way to build a great credit score as long as you keep your spending below 30% of your credit limit and you pay them on time.  

Even if you are worried about spending on your cards because you cannot count on sticking to your budget, you should still get a card to reap the credit-building benefits. You can link it to one fixed monthly bill, like a streaming service, set up autopay so you always pay on time, then cut it up so you aren't tempted to use it, and you'll get the benefit of building credit with none of the risk.  

3. You'll miss out on valuable cardholder benefits

Credit cards come with perks beyond rewards. You may get free rental car insurance and free travel insurance such as trip cancellation coverage or lost baggage insurance. If you don't have a credit card offering these protections, you'll have to use your own money paying for them out of pocket when you could have gotten them for free as a cardholder benefit. That unrealized money makes your life worse. 

4. You could end up facing more financial loss due to theft

If you commit to paying cash instead of using a credit card and your wallet gets stolen, you are out all the money you had in it, with no way to recover it. If you carry a credit card and little or no cash, then you won't be out anything in case of a theft. Most cards have guarantees that prevent you from having to pay for any fraudulent purchases. 

5. It will be much harder to rent a car or book a hotel 

Finally, booking a hotel or rental car is harder without a credit card. You can use a debit card, but they place a hold on your account so you need to have enough money in your account that you can afford to have some of it locked up for days or weeks. 

There is no reason to make your life worse. Unless you have a history of being completely unable to control your spending, do not listen to Dave Ramsey and avoid credit cards. Instead, get a card and use it responsibly, and your life will be a whole lot better.

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