Dave Ramsey Thinks You Should Ditch Your Credit Cards. Here's a Better Idea

Are credit cards really all that bad?

"A life without credit cards is a life of freedom." That's what financial guru Dave Ramsey firmly believes. In fact, Ramsey had made it clear that he really, really doesn't like credit cards and thinks they're absolutely unnecessary; he thinks they tend to hurt consumers financially. But is he right?

The downside of credit cards

Credit cards can make it easy to rack up debt -- the operative word being "can." If you keep swiping a credit card to make purchases without setting a budget or keeping tabs on your spending, then yes, a credit card could lead you into a very dark hole of debt. From there, you could end up racking up hundreds or even thousands of dollars in interest charges. And you could also end up damaging your credit score, making it very difficult to borrow money affordably when you need to.

But that's not guaranteed to happen. A big reason Dave Ramsey advises against credit card usage is that he's probably seen a lot of people get into trouble by going overboard on spending. But that doesn't mean you'll end up in that boat.

The right approach to credit cards

While credit cards can get you into trouble, if you follow these basic rules, you can actually get a lot out of them.

1. Never charge more than what you can afford to pay off by the time your bill comes due. The only exception here is if an emergency expense comes up and you truly have no choice but to charge it on one of your credit cards and pay it off over time. In that case, simply do your best to knock out that balance as soon as you can.
2. Set a spending budget so you know how much you can afford to charge. That could help you avoid going overboard.
3. Pay attention to your credit card's billing cycle so you know when your payments are due. Being late with a credit card bill could result in significant credit score damage.
4. Don't just pay your minimum balance. That may seem like a convenient option, but it'll only cause you to rack up costly interest. Again, there's an exception here if you're only paying your minimum payments because you charged a large emergency expense on your credit card, like a home or car repair.
5. Check your credit card balances frequently during the month. Doing so could prevent you from charging too many expenses at once and getting stuck having to carry a balance.
6. Don't pay an annual credit card fee unless there's a really good reason to do so. If paying that fee gives you access to more cash back or rewards, that's one thing. But run the numbers before handing that fee over to your credit card company and make sure that paying the annual fee is worth it for you.

A world of benefits

Credit cards can drive you into debt and damage your credit score. But when used responsibly, they can help you build a solid credit history and reward you with cash back for the purchases you're already making. And in some cases, they can offer protection in the event an item you buy is defective or there's an issue with a service you've paid for.

Dave Ramsey knows a lot about personal finance, and his advice is often worth following. But when it comes to credit cards, he may have a bit of an extreme view -- one that could cause you to miss out on a whole host of benefits.