Should You Get a Rewards Card? Here's What Dave Ramsey Thinks

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  • Ramsey says credit cards encourage overspending.
  • He also says "trillions" of rewards go unused.
  • Despite his arguments, if you budget your purchases and have a plan for your rewards, you can get a lot of value from rewards credit cards.

Ramsey insists rewards cards aren't that rewarding.

So, I love rewards credit cards. I use them for nearly everything. If I can charge it, I make sure I put it on the right card to maximize my rewards for it. But not all financial experts share my love for rewards.

Dave Ramsey is perhaps the most notorious anti-card activist for his hardline stance against credit cards of any kind -- including rewards cards. And as much as I hate to say it, his argument does make some good points. In my opinion, however, a good budget and a plan can get around most of his objections to rewards cards.

Point: Credit cards can make it easier to overspend

Ramsey has a few arguments against credit cards. The first, and most obvious, is that credit card users can accrue debt -- debt that comes with costly interest fees. But even if you pay in full every month, Ramsey says you should avoid credit cards, including rewards cards.

Why? On his show, Ramsey argues that people who use cash tend to spend less than people who use plastic. And this effect means people who use rewards cards aren't actually coming out ahead.

"While you feel like you're making money on this," he says, "at the end of the week, when all is added up -- you're losing."

Unfortunately, he's not necessarily wrong here. Studies have shown that people who use cash tend to spend less overall; they also value their purchases more. This is attributed to what's commonly known as "the pain of paying."

Essentially, studies have shown that the brain has a pain response to spending money. In other words, the pain centers of the brain light up when we consider the cost of something, reducing the potential pleasure we get from acquiring it. Similar studies suggest that this feeling is intensified when we use cash -- rather than credit cards -- because you're physically losing something (the cash) in the transaction.

Ramsey sums it up with this example: "Visualize a $100 bill in your hand -- then leaving your hand. When you hand the $100 bill, they don't give it back. When you hand them your plastic -- they give it back. You didn't lose anything. See how that feels, psychologically."

Point: Unused credit card rewards are worthless

Another part of Ramsey's argument against rewards credit cards is that many people let their rewards go unused. Depending on the rewards program, this could result in your rewards expiring -- and all that potential value disappearing into thin air.

In one show, Ramsey goes so far as to claim that there are "22 trillion unclaimed airline miles" just sitting in people's accounts, going to waste. Unfortunately, he doesn't offer a source for this astronomical number (and we couldn't verify it ourselves, either).

Are there people who miss out on credit card rewards because they go unused? Sure. Do all, or even most, cardholders let their rewards wither on the metaphorical vine? Hardly.

The solution: Have a budget and a plan

At the end of the day, Ramsey certainly makes some interesting points. But he also makes some stunning generalizations about cardholders that are not applicable to everyone -- or even the majority of us.

Yes, credit cards can definitely minimize the friction of making purchases and ease the physiological "pain of purchasing." When you're not watching your supply of cash dwindle with each buy, it's certainly easier to spend more money.

But this phenomenon is easily defeated with a simple trick: budgeting. As long as you know how much money you have to spend, and stay within those bounds, you can easily avoid the perils of swiping yourself into a hole.

Similarly, staying on top of your credit card rewards is easy as long as you have a plan. Many people who collect points and miles, for instance, do so with specific trips in mind. Every time I open a new travel rewards card, I know exactly where those points are going -- or, more specifically, where they're going to take me.

If you find yourself with points and miles you can't use, there's another simple trick: cash back rewards. Users who stick with cash back can turn their rewards into statement credits, paying off purchases and benefiting their budget without worrying about anything expiring.

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