This Is Dave Ramsey's Best Argument Against Rewards Credit Cards

Many of Ramsey's arguments against credit cards don't make sense, but this one might.

Dave Ramsey is a well-known advocate of living a debt-free life and he has made clear repeatedly he does not believe you should use credit cards -- even rewards cards that give you cash back, points, or miles for your purchases.

Many of Ramsey's reasons for steering clear of cards don't make much sense.

He's argued, for example, that you don't need a credit card to build credit because you shouldn't care about your credit score (which is simply untrue, as your credit score is used in all sorts of transactions). He's also said earning rewards isn't worth it because so many go unused (also a bad argument, since you can simply choose to use your rewards).

There is, however, one good point he makes. And, while his reasoning won't convince everyone, it's the best argument he's made for steering clear of rewards cards.

Here's what Ramsey had to say about one big downside of rewards cards

Ramsey's best argument against using rewards cards is that these cards end up perpetuating a system that preys on people who are struggling financially, need credit to get by, and get stuck paying the exorbitant interest rates that credit cards charge.

"Part of what pays for your rewards is the interest payments from other people," Ramsey said. "The 40% of people who don't pay off their balances each month and get slapped with interest payments are the ones paying for your rewards…And why can't they pay their balance at the end of the month? We don't know. Maybe a family has a medical bill pop up they can't cover because that month's budget is already too tight. Maybe a single mom is scraping by, holding her breath every time she swipes her card at the grocery checkout."

Ramsey's argument here is that by using credit cards to earn rewards -- even if you pay your balance in full -- you're enabling the credit card companies to persist in operating under a business model where they charge high rates (often 17% or higher), and high fees from those who can least afford it.

The system essentially transfers assets from poor people who can't afford to pay their balance in full to wealthier people who are able to benefit from rewards while paying their balance in full without interest costs. And, if you earn rewards, you're benefiting from this transfer of wealth.

Should you give up using rewards cards for that reason?

While Ramsey definitely has a point about how the credit card rewards system works in favor of those who have more, ultimately this is true of many aspects of the financial system. The government subsidizes wealthier people in the form of a mortgage tax deduction, for example, while banks pay interest to those with money and collect fees from those with too little who overdraft their accounts.

Even if you don't like the way this system is set up, deciding not to participate in it comes at a cost to you. You may decide you're willing to pay the cost of forgone credit card rewards because you don't want to help the card companies earn more profits. Or, you may decide to take advantage of the perks that are likely to continue to be available no matter what your personal preferences. But, whatever your choice, at least this Ramsey argument against rewards cards is worth thinking about -- unlike so many of his other reasons for steering clear of credit cards.