Dave Ramsey says don't use credit cards, even if you pay them off

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flyingaway
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Re: Dave Ramsey says don't use credit cards, even if you pay them off

Post by flyingaway »

Some people just could not manage basic finance.

My friend owns a rental house and his tenant always pays rent 1 week late with the 10% penalty, because of his pay schedule. He has money to go on vacation, but just could not to figure out how to shift the money in a week in order not to pay the 10% penalty.
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Cycle
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Re: Dave Ramsey says don't use credit cards, even if you pay them off

Post by Cycle »

theplayer11 wrote: Sun Nov 19, 2017 6:29 pm playing the credit card point game has allowed free trips to Europe the past few years with many more points not used. Would I spend less without? Possibly, but the points value would outweigh by a mile.
My wife and I went to Europe and Africa with sign up bonus points this year. Thanks mainly to the 100k chase saphire reserve bonuses, 70k Delta bonuses, 50k AA miles, 100k Hilton miles, we earned approx 700k miles this year, easily over 6k worth of rewards. Next year will be a lighter year since we've already claimed the big ones. Using cash would not save us $6k since we are pretty frugal.
Never look back unless you are planning to go that way
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Youngblood
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Re: Dave Ramsey says don't use credit cards, even if you pay them off

Post by Youngblood »

We hardly use cash or checks anymore.

Has DR mentioned that paper money has more germs than a toilet? Bacteria and viruses too numberous to list.

No thanks on using paper money.

Checks? The checkout lines would take forever.

Hooray for credit cards.

YB
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AntsOnTheMarch
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Re: Dave Ramsey says don't use credit cards, even if you pay them off

Post by AntsOnTheMarch »

daytona084 wrote: Mon Nov 20, 2017 10:17 am We use credit cards for everything. In our entire life, We have always paid off every credit card every month. So in effect we delay payment for everything we purchase by about 6 weeks. Have I ever said to myself, "you know I don't have the funds to buy this right now, but I will have the money in 6 weeks"...? No!

We only use "cash back" reward cards. Total cash back received to date: $12,719
This is exactly what we’ve been doing for 30 years. (And I bet if you took a poll here, you’d find a large percentage of bogleheads that do the same.)

Once, before online payments, the cc company tried to get us to pay fees by consistently sending the bill so it would arrive on Saturday and having a short time to pay. Even when I’d pay it that day, they would post it a day late and charge me a $15 late fee. I challenged 3 in a row and got them to credit me and then I stopped using the card. I think that’s what wanted all along. We were deadbeats to them because we didn’t pay interest or penalties.
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Ice-9
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Re: Dave Ramsey says don't use credit cards, even if you pay them off

Post by Ice-9 »

I haven't read through the entire thread, but....

1. Long ago, I have heard about studies concluding people spend more with credit cards than with cash, and I believe them.

2. I also believe there may be *some* of this effect in my own spending, although I consider it minimal. I do FEEL the pain after a big spending month even with credit cards and REMEMBER it in following months as I plan my future spending.

3. I disagree with Dave Ramsey's conclusion that in light of such studies it is unwise to ever use credit cards. One should also weigh:
- cashback rewards, which can be quite significant
- convenience of having a record of most spending if done on credit cards, which can be invaluable for monitoring and reviewing your spending habits and making any changes
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Re: Dave Ramsey says don't use credit cards, even if you pay them off

Post by lostdog »

deltaneutral83 wrote: Mon Nov 20, 2017 10:32 am 90% of Americans are going to be worse off with credit cards than not. His advice is catered to those 90%, which is fine. It's not a good look to crash on someone that is doing good work for an overwhelming majority of Americans AS COMPARED to their alternative, which is not the BH lifestyle, which may surprise some of you all. I have no idea why people who are fundamentally sound in finance listen to him to intentionally get bent out of shape? DR's got a mean streak too, probably because he has to listen to people who are $50k in credit card debt/$130k in student loan debt with a degree in basket weaving trying to tell him how they've got it all figured out. I'd get tired of that too.

His "12% in good mutual funds with an adviser" is the part of his rhetoric that is misleading. However, his ultimate goal is to get people to invest period, and the alternative for most Americans isn't BH investing, it's not investing period and dying with $13 in their checking account after having to move in with one of their children and live off SS. BH's can have such an arrogance about ourselves on this issue. DR's American Funds advisers who charge a load for closet index funds with no AUM other than the high ER's that have done extremely well. It's not even close to bad advice for 90% of Americans. is it something I recommend for BH's, uh no, but not everyone handle the emotional swings of the market on their own and build out a 3/4/5 fund portfolio.

While his investing advice is not BH, it does make me laugh that people are willing to to call him a fraud on his debt teachings. It's like you all have never been around a family member or coworker/boss who has expertise on some things but not others. I have yet to meet a human being that knows everything there is to know. Maybe you all have.
+1

I completely agree with you. Before some of you rail on him you have consider his audience. Bogleheads are the minority. In American culture it is the norm to have car debt, mortgage, school loans, credit card debt. These people don't even think twice about it. Dave is there to get in their face to change that culture. As bogleheads we already get it. Just to even get someone to invest just a bit is a huge task.
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Re: Dave Ramsey says don't use credit cards, even if you pay them off

Post by S&L1940 »

Alexa9 wrote: Mon Nov 20, 2017 8:09 am Amazon is too easy to buy things after a couple drinks that you've been wavering on getting. I think he is correct in some ways.
Never drink and spend, friends should keep friends off Amazon during during drinking sprees...
Don't it always seem to go * That you don't know what you've got * Till it's gone
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Re: Dave Ramsey says don't use credit cards, even if you pay them off

Post by smitcat »

lostdog wrote: Mon Nov 20, 2017 11:58 am
deltaneutral83 wrote: Mon Nov 20, 2017 10:32 am 90% of Americans are going to be worse off with credit cards than not. His advice is catered to those 90%, which is fine. It's not a good look to crash on someone that is doing good work for an overwhelming majority of Americans AS COMPARED to their alternative, which is not the BH lifestyle, which may surprise some of you all. I have no idea why people who are fundamentally sound in finance listen to him to intentionally get bent out of shape? DR's got a mean streak too, probably because he has to listen to people who are $50k in credit card debt/$130k in student loan debt with a degree in basket weaving trying to tell him how they've got it all figured out. I'd get tired of that too.

His "12% in good mutual funds with an adviser" is the part of his rhetoric that is misleading. However, his ultimate goal is to get people to invest period, and the alternative for most Americans isn't BH investing, it's not investing period and dying with $13 in their checking account after having to move in with one of their children and live off SS. BH's can have such an arrogance about ourselves on this issue. DR's American Funds advisers who charge a load for closet index funds with no AUM other than the high ER's that have done extremely well. It's not even close to bad advice for 90% of Americans. is it something I recommend for BH's, uh no, but not everyone handle the emotional swings of the market on their own and build out a 3/4/5 fund portfolio.

While his investing advice is not BH, it does make me laugh that people are willing to to call him a fraud on his debt teachings. It's like you all have never been around a family member or coworker/boss who has expertise on some things but not others. I have yet to meet a human being that knows everything there is to know. Maybe you all have.
+1

I completely agree with you. Before some of you rail on him you have consider his audience. Bogleheads are the minority. In American culture it is the norm to have car debt, mortgage, school loans, credit card debt. These people don't even think twice about it. Dave is there to get in their face to change that culture. As bogleheads we already get it. Just to even get someone to invest just a bit is a huge task.
I believe one of his goals is to lead his following to his 'benefactors' which he speaks about and advertises. I see no reason not too detail what he says that is not accurate - that is done on this site no matter who we are speaking about. Calling out someone's inaccuracy is valuable to any reader that is trying to put together the best plan of action. The fact that some of his statements are pretty far off base and that there are a few of them is a reason why there is a larger amount of rebuttal.
prince
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Re: Dave Ramsey says don't use credit cards, even if you pay them off

Post by prince »

Love Dave Ramsey and I understand his reasoning for credit card usage or lack of it as his specialty is getting people out of debt and keeping them out. I am out of debt sans mortgage but use credit cards responsibly for points/cash back. I have made more than enough to cover the annual fees and then some on my cards this way.
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Re: Dave Ramsey says don't use credit cards, even if you pay them off

Post by Earl Lemongrab »

There have been various, divisive, threads on this topic in the past. Very little good comes from them other than arguments. Having been well-involved in those arguments before, I won't again.
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Re: Dave Ramsey says don't use credit cards, even if you pay them off

Post by raamakoti »

our modest spending gives us around $400 to $500, for spending everything on credit card and pay it off every month. Whats the advantage of leaving that $500 0n the table?
Discover /Chase - 5% gas usually for 3 months other categories like home depot, groceries.
Costco - 4% cash back on gas rest of the 9 months-
Costco - 3% restaurants and 1% balance. keep eyes open for chase/discover
Amazon - 5% cashback all year on all amazon purchases.

None of the above cards charge fee.
Last edited by raamakoti on Mon Nov 20, 2017 12:53 pm, edited 1 time in total.
prince
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Re: Dave Ramsey says don't use credit cards, even if you pay them off

Post by prince »

raamakoti wrote: Mon Nov 20, 2017 12:49 pm our modest spending gives us around $400 to $500, for spending everything on credit card and pay it off every month. Whats the advantage of leaving that $500 0n the table?
Agreed. I make over a $1000 each year from various credit card cash back / points along with the price match and damage protection perks. The key is paying it off each month as if you were actually using cash. If you carry a balance then this strategy is definitely not for you.
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Re: Dave Ramsey says don't use credit cards, even if you pay them off

Post by Da5id »

Earl Lemongrab wrote: Mon Nov 20, 2017 12:33 pm There have been various, divisive, threads on this topic in the past. Very little good comes from them other than arguments. Having been well-involved in those arguments before, I won't again.
Yeah, I got sucked in by the click bait nature of these threads. "You won't believe 5 things Dave Ramsey said. Especially the 3rd.".

Dave Ramsey does start a feeding frenzy, kind of like MMM threads, or discussions of dividends or international investing...
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Re: Dave Ramsey says don't use credit cards, even if you pay them off

Post by sciliz »

willthrill81 wrote: Sun Nov 19, 2017 6:31 pm DR's audience are middle class and working class Americans who have little to no financial literacy. Among much of this group, research has indeed shown that people will spend more if using a credit card instead of hard cash simply because it's easier for them to see how much money they have and are spending. Among the more financially literate, spending is the same regardless of the medium used.
Citation please?
I'm not trying to be a jerk. I did some Googling and I could find a large number of studies showing that people buy more with plastic, but I didn't see any that seemed to break it down by "financial literacy".
To be honest, from what I know about psychology and behavioral economics, I don't think it makes sense that it could work that way. At least if you are measuring "financial literacy" by knowledge and not by behavioral patterns.

Most purchasing decisions are made quickly- whether you have good habits developed from a long term sense of your own circumstances of budget, cashflow and financial goals- or whether you have bad habits AND bad impulse control (and are thus a CC company's ideal customer :twisted: ). Because these decisions are made quickly, small factors that make it easier or harder to purchase (nudges in Thaler-speak) will in the aggregate impact most people. This is pretty much why advertising exists. My father, who worked in advertising, used to say that "everyone things advertising works. Nobody thinks it works *on them*". I think the credit card over spending phenomenon is probably similar. People know that people in general spend more with plastic, but nobody thinks *they* make bad decisions because of plastic.


Bogleheads:
"Most people can't beat the market, there are a lot of Really Smart People with nothing but time to focus on figuring out opportunity all trying to do it. Investing in index funds is a simple way to reduce costs. Vanguard as a company is particularly appealing, because they do not need to turn a profit for their own shareholders"

Also Bogleheads (judging by most of the responses to this thread):
"Some people are dumb with credit cards. I am one of the Really Smart People with nothing but time to focus on figuring out how to always get X% cashback. I am rewarded for my efforts with trips to exotic places, and I *know* I never overspend because I have a budget! X corporation's credit card product is particularly appealing because they offer me the most cashback for my credit card business."

Full disclosure: I buy index funds and use rewards credit cards. So, to the degree any of the above reads like calling out of hypocrisy, please know it is intended as a self-reflection of a point of cognitive dissonance, not self-satisfied smarm!
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Re: Dave Ramsey says don't use credit cards, even if you pay them off

Post by TheHouse7 »

I'm part of the 90% that spends more with a credit card. Transactional friction is a real thing, and visa is doing everything possible to remove it.

I enjoy the simplicity of not having additional accounts. (Go months without thinking about credit, other than these treads)
"PSX will always go up 20%, why invest in anything else?!" -Father-in-law early retired.
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Re: Dave Ramsey says don't use credit cards, even if you pay them off

Post by bertilak »

Ramsey's advice is like "Don't use power tools. You might hurt yourself."
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Re: Dave Ramsey says don't use credit cards, even if you pay them off

Post by Da5id »

sciliz wrote: Mon Nov 20, 2017 1:09 pm Full disclosure: I buy index funds and use rewards credit cards. So, to the degree any of the above reads like calling out of hypocrisy, please know it is intended as a self-reflection of a point of cognitive dissonance, not self-satisfied smarm!
I use reward cards but have no illusions that I'm immune to the all too human effects that presumably raise my spending (and upon which marketers play with increasing skill). I'd guess I win on the whole, not on the few % rewards on the spending part, but because I get large signup bonuses for mandatory spending baked into my budget (like insurance payments, prepaying cell phone bills, temple membership, etc) that I'd definitely do anyway. But do I eat out a bit more when the Chase Freedom category is 5% for restaurants? Yeah I think I do. Am I more likely to spend at all, or to spend more, using plastic? I'd guess so too, though it is hard to tell for sure as it is impossible, as individual, to do a controlled (and blind) experiment. But I'd hesitate to ever claim personally that I'm immune to well documented human tendencies, whether in spending, investing, cognitive dissonance, whatever.

If I lived life near the edge financially I'd strongly consider the cash only option except where logistically difficult. But as my savings rate is ridiculous (>50%) can't be bothered.
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Re: Dave Ramsey says don't use credit cards, even if you pay them off

Post by smitcat »

"Citation please?
I'm not trying to be a jerk. I did some Googling and I could find a large number of studies showing that people buy more with plastic, but I didn't see any that seemed to break it down by "financial literacy".
To be honest, from what I know about psychology and behavioral economics, I don't think it makes sense that it could work that way. At least if you are measuring "financial literacy" by knowledge and not by behavioral patterns."

I no longer work for the database /marketing / mailing company that collected data , aggregated, sorted, and provided feedback lists for companies to market to their clients but I can surely remember there was a distinct pattern for these offers. We did this for many banks, phone companies, retail operations as well as for NFP's and the patterns repeated pretty well.
These lists are assembled and used for future offers and are also commonly used to 'select' a preferred person to receive an offer.
For bank CC's there was a distinct list preference for level of income, education and family size.
So they are targeting you much clearer and in greater detail than you might think - we were still in that business when the CC companies ran afoul by attempting to sort out the 'good payers' and limit the offers utilizing that distinction as well.
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Re: Dave Ramsey says don't use credit cards, even if you pay them off

Post by sciliz »

smitcat wrote: Mon Nov 20, 2017 1:34 pm "Citation please?
I'm not trying to be a jerk. I did some Googling and I could find a large number of studies showing that people buy more with plastic, but I didn't see any that seemed to break it down by "financial literacy".
To be honest, from what I know about psychology and behavioral economics, I don't think it makes sense that it could work that way. At least if you are measuring "financial literacy" by knowledge and not by behavioral patterns."

I no longer work for the database /marketing / mailing company that collected data , aggregated, sorted, and provided feedback lists for companies to market to their clients but I can surely remember there was a distinct pattern for these offers. We did this for many banks, phone companies, retail operations as well as for NFP's and the patterns repeated pretty well.
These lists are assembled and used for future offers and are also commonly used to 'select' a preferred person to receive an offer.
For bank CC's there was a distinct list preference for level of income, education and family size.
So they are targeting you much clearer and in greater detail than you might think - we were still in that business when the CC companies ran afoul by attempting to sort out the 'good payers' and limit the offers utilizing that distinction as well.

Ahhh, very interesting. So you didn't mean "financial literacy" as attempted to be measured objectively by academics with a survey- you meant it as the set of statistically correlated traits of demographics and behavioral readouts as measured by real marketers who stood to make money from their correct predictions. That is a very different thing.

To be completely clear- does what you're saying imply that, statistically, the better the rewards you get from the for profit CC company, the more profitable you are to them?
It makes me wonder just a tiny bit about those on this thread proud of their CC rewards. Of course, some of them are assuredly the Really Clever People who Beat the Odds. Much like some stock pickers really are Warren Buffets.
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Re: Dave Ramsey says don't use credit cards, even if you pay them off

Post by supalong52 »

His advice is geared towards people who are in or have come out of deep debt. It's like telling a recovering alcoholic not to have a single beer because he is likely to relapse. Doesn't apply to most people on this site.
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Re: Dave Ramsey says don't use credit cards, even if you pay them off

Post by Da5id »

sciliz wrote: Mon Nov 20, 2017 1:51 pm It makes me wonder just a tiny bit about those on this thread proud of their CC rewards. Of course, some of them are assuredly the Really Clever People who Beat the Odds. Much like some stock pickers really are Warren Buffets.
Excessively snarky IMHO, and I'm on the side of believing that CCs likely lead me and most people to increased spending. But to some degree I think you (and DR) are wrong. I get 4% back on gas with my Costco card. I consider that a straight win. It doesn't make me drive more, it doesn't make me seek out more expensive gas. Free money to the best of my ability to tell. I likewise get money back by using my credit card on my insurance payments, medical care payments, temple membership. I don't believe I consume any of those more by using credit cards, so also straight wins. Now whether I spend more at Costco, at the supermarket, in other stores or restaurants using credit, quite possible I do (I'd certainly not discount the research that says that is the tendency of most consumers).
Last edited by Da5id on Mon Nov 20, 2017 2:53 pm, edited 1 time in total.
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Re: Dave Ramsey says don't use credit cards, even if you pay them off

Post by WalterMitty »

I think Dave Ramsey takes A LOT of unnecessary flack from a lot of folks. When you consider just how bad most folks are with money, I think Dave does a great job of pushing a decent approach out to the masses. If you're reading this sentence right now, you are way out of normal for the 350million in the US. As a society we do an unbelievable poor job of educating people about finances...yet, we make it really easy to borrow and spend money....loans, credit cards, etc. The data is staggering....student debt $1.3 trillion, average household credit card debit is about $17k, and the median (not average) households have saved for retirement is $5K!!!

When I take all that into consideration, I think what Dave is spouting off is good advice. A few analogies...

1) if there was a great kindergarten teacher out there, would we make fun of him/her because they are only teaching colors and letters? I'm sure Dave would hate this analogy, but I think it holds. He even names his first 6 steps, "Baby" steps!

2) A triage doctor on the front lines might not be able to compete with a plastic surgeon in terms of leaving scars or not, but he/she is just trying to save the patient.

I agree with most of what Dave is pushing, except his actual investment choices (give me VTI and forget about it, thank you very much).

Given Dave's clientele and what I think is his main message (debt is dumb), naturally he's going to push debit cards versus CCs. It makes the most sense for the most people.

Obviously, we should all do what works for us, so know thy self and proceed accordingly.
Last edited by WalterMitty on Mon Nov 20, 2017 3:08 pm, edited 1 time in total.
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Re: Dave Ramsey says don't use credit cards, even if you pay them off

Post by WalterMitty »

deltaneutral83 wrote: Mon Nov 20, 2017 10:32 am 90% of Americans are going to be worse off with credit cards than not. His advice is catered to those 90%, which is fine. It's not a good look to crash on someone that is doing good work for an overwhelming majority of Americans AS COMPARED to their alternative, which is not the BH lifestyle, which may surprise some of you all. I have no idea why people who are fundamentally sound in finance listen to him to intentionally get bent out of shape? DR's got a mean streak too, probably because he has to listen to people who are $50k in credit card debt/$130k in student loan debt with a degree in basket weaving trying to tell him how they've got it all figured out. I'd get tired of that too.

His "12% in good mutual funds with an adviser" is the part of his rhetoric that is misleading. However, his ultimate goal is to get people to invest period, and the alternative for most Americans isn't BH investing, it's not investing period and dying with $13 in their checking account after having to move in with one of their children and live off SS. BH's can have such an arrogance about ourselves on this issue. DR's American Funds advisers who charge a load for closet index funds with no AUM other than the high ER's that have done extremely well. It's not even close to bad advice for 90% of Americans. is it something I recommend for BH's, uh no, but not everyone handle the emotional swings of the market on their own and build out a 3/4/5 fund portfolio.

While his investing advice is not BH, it does make me laugh that people are willing to to call him a fraud on his debt teachings. It's like you all have never been around a family member or coworker/boss who has expertise on some things but not others. I have yet to meet a human being that knows everything there is to know. Maybe you all have.
+1
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Re: Dave Ramsey says don't use credit cards, even if you pay them off

Post by flamesabers »

Earl Lemongrab wrote: Mon Nov 20, 2017 12:33 pmThere have been various, divisive, threads on this topic in the past. Very little good comes from them other than arguments.
I agree. In one of these Dave Ramsey's threads someone made the (sarcastic?) suggestion that the site should have a sub-forum dedicated to Dave Ramsey in consideration to how often the man is discussed on this forum.
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Re: Dave Ramsey says don't use credit cards, even if you pay them off

Post by ziggy29 »

flamesabers wrote: Mon Nov 20, 2017 2:57 pm
Earl Lemongrab wrote: Mon Nov 20, 2017 12:33 pmThere have been various, divisive, threads on this topic in the past. Very little good comes from them other than arguments.
I agree. In one of these Dave Ramsey's threads someone made the (sarcastic?) suggestion that the site should have a sub-forum dedicated to Dave Ramsey in consideration to how often the man is discussed on this forum.
Agreed. I think it's important to know Ramsey's target audience -- addict, people addicted to debt.

Just as someone addressing alcoholics wouldn't suggest there's nothing wrong with having a drink or two once in a while, someone addressing "debtaholics" won't suggest that their audience go out and prudently use debt and credit as a tool.
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Re: Dave Ramsey says don't use credit cards, even if you pay them off

Post by mickeyd »

Does this change your approach to using credit cards?
Dave goes overboard when he says this. Using a CC and paying off each month and claiming cash rewards is a very efficient way to spend your money. I do not believe that the use of a CC makes me spend more than I plan to spend. I was not included in the surveys quoted.

Dave uses this to juice up his show and make more $ for Dave.
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Re: Dave Ramsey says don't use credit cards, even if you pay them off

Post by Dandy »

I'm sure there is truth to the idea that that using credit or debit cards you spend more. Even buying on time without interest charges would probably do the same thing. We are not very logical when it comes to spending and properly evaluating different modes of paying and its impact on how much we buy.

We use credit cards extensively but not debit cards. if you are generally frugal and used to living below your means you probably won't get too out of control by using your credit card. If you are not, credit card buyer beware.
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Re: Dave Ramsey says don't use credit cards, even if you pay them off

Post by steelerfan »

I followed DRs advice many years ago when I was in debt over $50K with a net worth in the red. DR taught me good financial principles like have an EF, spending less than you make, acting your wage, and yes, not to go into debt. He has many other principles as well. He is VERY debt adverse and hates CC companies because they pry on people and give people credit that frankly should not have credit (like college students with no job).

I do not follow his advice on 100% stock mutual funds and other advice on investing, but I don't throw the baby out with the bath water.

Today, I am in a MUCH better financial place thanks to DR. I still listen to his podcast and agree with 90% of the advice he gives.
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Re: Dave Ramsey says don't use credit cards, even if you pay them off

Post by Clever_Username »

I'm not, nor have I ever been, in Dave Ramsey's target demographic. If you have debt addiction issues, you are and probably should at least consider his suggestions regarding debt management, including the whole "stop accruing debt, even useful varieties."

Otherwise, I mentally put him in the same category as various celebrities that get anointed as an expert in a field they aren't an expert in and make public incorrect proclamations related to said field.
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Re: Dave Ramsey says don't use credit cards, even if you pay them off

Post by lostdog »

Had I followed Dave's rules in my twenties we would have e a higher networth, period.
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Re: Dave Ramsey says don't use credit cards, even if you pay them off

Post by willthrill81 »

sciliz wrote: Mon Nov 20, 2017 1:09 pm
willthrill81 wrote: Sun Nov 19, 2017 6:31 pm DR's audience are middle class and working class Americans who have little to no financial literacy. Among much of this group, research has indeed shown that people will spend more if using a credit card instead of hard cash simply because it's easier for them to see how much money they have and are spending. Among the more financially literate, spending is the same regardless of the medium used.
Citation please?
I'm not trying to be a jerk. I did some Googling and I could find a large number of studies showing that people buy more with plastic, but I didn't see any that seemed to break it down by "financial literacy".
To be honest, from what I know about psychology and behavioral economics, I don't think it makes sense that it could work that way. At least if you are measuring "financial literacy" by knowledge and not by behavioral patterns.
See the three peer-reviewed articles below. Try Google Scholar instead.
"Lack of financial knowledge, age, number of credit cards, delay of gratification, and attitudes toward credit-card use were related to debt. Sensation seeking, materialism, the Student Attitude Toward Debt scale, gender, and grade point average were not unique predictors of debt. Students reporting greater debt reported greater stress and decreased financial well being. Results highlight the need for comprehensive financial literacy education among college students" (Norvilitis et al. 2006, p. 1395).
"Using a sample of 1,354 students from a major southeastern university, results suggest that financial knowledge is a significant factor in the credit card decisions of college students. Students with higher scores on a measure of personal financial knowledge are more likely to engage in more responsible credit card use" (Robb 2011, p. 690)
"In all cases, a student’s use of credit cards strengthened the relationship between his or her attitude toward money and compulsive buying. This suggests that credit card usage exacerbates the problem of compulsive buying" (url=https://www.researchgate.net/profile/Ja ... udents.pdf]Roberts and Jones, 2001, p. 229-230[/url]).
Last edited by willthrill81 on Mon Nov 20, 2017 4:30 pm, edited 1 time in total.
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Re: Dave Ramsey says don't use credit cards, even if you pay them off

Post by Jags4186 »

This is all solved simply by defining what you want to save per year and spending the rest. Then it doesn’t matter if you put it on a credit card or pay cash. Well it matters since you’re giving up your credit card rewards by paying cash.

If you can’t prioritize saving over spending then maybe you shouldn’t have a CC. I certainly save more than Dave Ramsey recommends and I have no qualms using plastic even if it makes me spend more (which after rewards is simply not the case).
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Re: Dave Ramsey says don't use credit cards, even if you pay them off

Post by soccerrules »

Who's Dave Ramsey ?






JK ! :D
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Re: Dave Ramsey says don't use credit cards, even if you pay them off

Post by gnujoe2001 »

I suppose there has to be some truth to people spending more with credit cards, as I recall that being one of the reasons pushed on shops to accept credit card payments and justify the merchant transaction fees.

But I have to think a lot of it rests on individual spending habits, regardless of payment method. The claim that you can't spend cash that isn't in your pocket kinda goes away when spender just gets more cash next time they're at the ATM to make sure they don't "run out" at the store.

But man what a hassle to have to always be running to the bank/ATM. Plus, cash usage doesn't leave an audit trail to check against budget logging, and I had those teenage moments of "what happened to those couple $20 bills i had?!?" So going cash only alone isn't going to help much, and as others have mentioned, will leave other CC benefits on the table.
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Re: Dave Ramsey says don't use credit cards, even if you pay them off

Post by knpstr »

On principle, he preaches for one to eliminate and then avoid ALL debt.

Credit cards (even paid in full monthly) is still technically debt.
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Re: Dave Ramsey says don't use credit cards, even if you pay them off

Post by smitcat »

sciliz wrote: Mon Nov 20, 2017 1:51 pm
smitcat wrote: Mon Nov 20, 2017 1:34 pm "Citation please?
I'm not trying to be a jerk. I did some Googling and I could find a large number of studies showing that people buy more with plastic, but I didn't see any that seemed to break it down by "financial literacy".
To be honest, from what I know about psychology and behavioral economics, I don't think it makes sense that it could work that way. At least if you are measuring "financial literacy" by knowledge and not by behavioral patterns."

I no longer work for the database /marketing / mailing company that collected data , aggregated, sorted, and provided feedback lists for companies to market to their clients but I can surely remember there was a distinct pattern for these offers. We did this for many banks, phone companies, retail operations as well as for NFP's and the patterns repeated pretty well.
These lists are assembled and used for future offers and are also commonly used to 'select' a preferred person to receive an offer.
For bank CC's there was a distinct list preference for level of income, education and family size.
So they are targeting you much clearer and in greater detail than you might think - we were still in that business when the CC companies ran afoul by attempting to sort out the 'good payers' and limit the offers utilizing that distinction as well.

Ahhh, very interesting. So you didn't mean "financial literacy" as attempted to be measured objectively by academics with a survey- you meant it as the set of statistically correlated traits of demographics and behavioral readouts as measured by real marketers who stood to make money from their correct predictions. That is a very different thing.

To be completely clear- does what you're saying imply that, statistically, the better the rewards you get from the for profit CC company, the more profitable you are to them?
It makes me wonder just a tiny bit about those on this thread proud of their CC rewards. Of course, some of them are assuredly the Really Clever People who Beat the Odds. Much like some stock pickers really are Warren Buffets.
You must have read over the key line at the end - they were not allowed to limit the offers by eliminating the folks that will not end up paying fees and penalties.
Of course if you do not want to utilize credit cards by all means do not do so.
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Re: Dave Ramsey says don't use credit cards, even if you pay them off

Post by smitcat »

knpstr wrote: Mon Nov 20, 2017 5:04 pm On principle, he preaches for one to eliminate and then avoid ALL debt.

Credit cards (even paid in full monthly) is still technically debt.
I do not think debt is necessarily an important metric to keep track of compared to net worth - things like spending budgets, savings rate, and your planning numbers have value.

A person can have no debt and have negative net worth or they can have 20,000 debt and be worth $10 million dollars.
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Re: Dave Ramsey says don't use credit cards, even if you pay them off

Post by SeaToTheBay »

One point I'll add (pro-CC) is that credit cards allow me to review my purchases each month, so the "pain" actually hits me twice as I see, "oh yeah, I bought that plane ticket, which really jacked up my expenses this month" even if I've already taken the flight. I understand many/most people won't review their statements, but for those who do, using cards can actually have an opposite effect, as once you spend cash that transaction is usually forgotten.
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Re: Dave Ramsey says don't use credit cards, even if you pay them off

Post by willthrill81 »

smitcat wrote: Mon Nov 20, 2017 5:12 pmA person can have no debt and have negative net worth or they can have 20,000 debt and be worth $10 million dollars.
Please elaborate on specifically how a person can have a negative net worth with no debt.
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Re: Dave Ramsey says don't use credit cards, even if you pay them off

Post by Teague »

If the premise is that credit cards are more convenient than wads of cash, and folks spend more because of that, I cannot disagree.

But does that mean cash is therefore generally superior to credit cards? That argument can be taken to absurdity, e.g. paper cash is more convenient than Yapese stone money, so we should really be using giant stones carried around with big poles.

https://en.wikipedia.org/wiki/Rai_stones
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Re: Dave Ramsey says don't use credit cards, even if you pay them off

Post by smitcat »

willthrill81 wrote: Mon Nov 20, 2017 5:24 pm
smitcat wrote: Mon Nov 20, 2017 5:12 pmA person can have no debt and have negative net worth or they can have 20,000 debt and be worth $10 million dollars.
Please elaborate on specifically how a person can have a negative net worth with no debt.
Sorry - no net worth , living paycheck to paycheck.
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Re: Dave Ramsey says don't use credit cards, even if you pay them off

Post by Lancelot »

grettman wrote: Mon Nov 20, 2017 7:53 am What DRIVES ME NUTs about his credit card advice is he says over and over "No one has gotten wealthy with credit card points / rewards".

He misses the point when people call and ask him about this. They aren't asking if CCs will make you wealthy. They ask if it is okay to pay off the CCs monthly and earn points while you are at it. Overstating things and obfuscation are Dave's number 1 and number 2 moves in his playbook.

I get it that he doesn't want people to play "kissy face" with debt. But can't he explain it without being so obvious about dodging the real question?
Yeah Dave being Dave. I listened to the pod cast and, as usual, Dave was condescending to the caller, saying "Are you smarter than Well's Fargo? Schwab?" Referencing the research those firms did with respect to "pain points" of using cash instead of plastic.

In the age of reality TV, we now have financial theater; people asking permission/validation to make purchases and investments.
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Re: Dave Ramsey says don't use credit cards, even if you pay them off

Post by mikefixac »

I rarely rarely use cash. Chipotle app, my food is paid for, and I just pick it up. So either do that, or credit card, or Apple Watch. I'm looking forward to the 666 chip to get implanted in my brain. Then I won't have to bother touching the Apple Pay on my watch. OMG, first world problems. What are we to do?
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Re: Dave Ramsey says don't use credit cards, even if you pay them off

Post by sciliz »

willthrill81 wrote: Mon Nov 20, 2017 4:23 pm
sciliz wrote: Mon Nov 20, 2017 1:09 pm
willthrill81 wrote: Sun Nov 19, 2017 6:31 pm DR's audience are middle class and working class Americans who have little to no financial literacy. Among much of this group, research has indeed shown that people will spend more if using a credit card instead of hard cash simply because it's easier for them to see how much money they have and are spending. Among the more financially literate, spending is the same regardless of the medium used.
Citation please?
I'm not trying to be a jerk. I did some Googling and I could find a large number of studies showing that people buy more with plastic, but I didn't see any that seemed to break it down by "financial literacy".
To be honest, from what I know about psychology and behavioral economics, I don't think it makes sense that it could work that way. At least if you are measuring "financial literacy" by knowledge and not by behavioral patterns.
See the three peer-reviewed articles below. Try Google Scholar instead.
"Lack of financial knowledge, age, number of credit cards, delay of gratification, and attitudes toward credit-card use were related to debt. Sensation seeking, materialism, the Student Attitude Toward Debt scale, gender, and grade point average were not unique predictors of debt. Students reporting greater debt reported greater stress and decreased financial well being. Results highlight the need for comprehensive financial literacy education among college students" (Norvilitis et al. 2006, p. 1395).
"Using a sample of 1,354 students from a major southeastern university, results suggest that financial knowledge is a significant factor in the credit card decisions of college students. Students with higher scores on a measure of personal financial knowledge are more likely to engage in more responsible credit card use" (Robb 2011, p. 690)
"In all cases, a student’s use of credit cards strengthened the relationship between his or her attitude toward money and compulsive buying. This suggests that credit card usage exacerbates the problem of compulsive buying" (url=https://www.researchgate.net/profile/Ja ... udents.pdf]Roberts and Jones, 2001, p. 229-230[/url]).
Sorry, the specific claim I am having trouble verifying is that "among the more financially literate spending is the same regardless of the medium used". I don't doubt that lack of financial knowledge can lead to debt, and that personal financial knowledge correlates with "more responsible credit card use". But you can use a credit card responsibly (never carry a balance, track and budget your spending) and still have it nudge your spending (e.g. spending $79.51 at the grocery store instead of $75- the worst wrinkle in the literature I read was that that extra plastic-related spending is likely to be on something unhealthy!).

For my own quirky psychology, I'm pretty sure if I made it a personal rule that I could only carry and spend $100 bills, I would spend the least (this has been termed the denomination effect). Hey! I know! I'll build a special wallet that makes those $100s really hard to get at, write a book explaining how to use it, call it the Rai stone approximation method (thanks Teague for that mental image!) and sell it on my website like Dave Ramsey :wink: !
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Re: Dave Ramsey says don't use credit cards, even if you pay them off

Post by ThePrince »

lack_ey wrote: Sun Nov 19, 2017 5:36 pm Nobody cares (should care, in the real world) what Dave Ramsey thinks because he's not an expert on anything relevant.
A foolish statement.
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Re: Dave Ramsey says don't use credit cards, even if you pay them off

Post by ThePrince »

Lancelot wrote: Mon Nov 20, 2017 7:35 pm
grettman wrote: Mon Nov 20, 2017 7:53 am What DRIVES ME NUTs about his credit card advice is he says over and over "No one has gotten wealthy with credit card points / rewards".

He misses the point when people call and ask him about this. They aren't asking if CCs will make you wealthy. They ask if it is okay to pay off the CCs monthly and earn points while you are at it. Overstating things and obfuscation are Dave's number 1 and number 2 moves in his playbook.

I get it that he doesn't want people to play "kissy face" with debt. But can't he explain it without being so obvious about dodging the real question?
Yeah Dave being Dave. I listened to the pod cast and, as usual, Dave was condescending to the caller, saying "Are you smarter than Well's Fargo? Schwab?" Referencing the research those firms did with respect to "pain points" of using cash instead of plastic.

In the age of reality TV, we now have financial theater; people asking permission/validation to make purchases and investments.
Are you/we smarter than Wells Fargo, Schwab, etc? Collectively, society isn’t. That is Dave’s point.
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Re: Dave Ramsey says don't use credit cards, even if you pay them off

Post by ThePrince »

willthrill81 wrote: Mon Nov 20, 2017 4:23 pm
sciliz wrote: Mon Nov 20, 2017 1:09 pm
willthrill81 wrote: Sun Nov 19, 2017 6:31 pm DR's audience are middle class and working class Americans who have little to no financial literacy. Among much of this group, research has indeed shown that people will spend more if using a credit card instead of hard cash simply because it's easier for them to see how much money they have and are spending. Among the more financially literate, spending is the same regardless of the medium used.
Citation please?
I'm not trying to be a jerk. I did some Googling and I could find a large number of studies showing that people buy more with plastic, but I didn't see any that seemed to break it down by "financial literacy".
To be honest, from what I know about psychology and behavioral economics, I don't think it makes sense that it could work that way. At least if you are measuring "financial literacy" by knowledge and not by behavioral patterns.
See the three peer-reviewed articles below. Try Google Scholar instead.
"Lack of financial knowledge, age, number of credit cards, delay of gratification, and attitudes toward credit-card use were related to debt. Sensation seeking, materialism, the Student Attitude Toward Debt scale, gender, and grade point average were not unique predictors of debt. Students reporting greater debt reported greater stress and decreased financial well being. Results highlight the need for comprehensive financial literacy education among college students" (Norvilitis et al. 2006, p. 1395).
"Using a sample of 1,354 students from a major southeastern university, results suggest that financial knowledge is a significant factor in the credit card decisions of college students. Students with higher scores on a measure of personal financial knowledge are more likely to engage in more responsible credit card use" (Robb 2011, p. 690)
"In all cases, a student’s use of credit cards strengthened the relationship between his or her attitude toward money and compulsive buying. This suggests that credit card usage exacerbates the problem of compulsive buying" (url=https://www.researchgate.net/profile/Ja ... udents.pdf]Roberts and Jones, 2001, p. 229-230[/url]).
+1
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Re: Dave Ramsey says don't use credit cards, even if you pay them off

Post by gvsucavie03 »

ThePrince wrote: Mon Nov 20, 2017 8:34 pm
willthrill81 wrote: Mon Nov 20, 2017 4:23 pm
sciliz wrote: Mon Nov 20, 2017 1:09 pm
willthrill81 wrote: Sun Nov 19, 2017 6:31 pm DR's audience are middle class and working class Americans who have little to no financial literacy. Among much of this group, research has indeed shown that people will spend more if using a credit card instead of hard cash simply because it's easier for them to see how much money they have and are spending. Among the more financially literate, spending is the same regardless of the medium used.
Citation please?
I'm not trying to be a jerk. I did some Googling and I could find a large number of studies showing that people buy more with plastic, but I didn't see any that seemed to break it down by "financial literacy".
To be honest, from what I know about psychology and behavioral economics, I don't think it makes sense that it could work that way. At least if you are measuring "financial literacy" by knowledge and not by behavioral patterns.
See the three peer-reviewed articles below. Try Google Scholar instead.
"Lack of financial knowledge, age, number of credit cards, delay of gratification, and attitudes toward credit-card use were related to debt. Sensation seeking, materialism, the Student Attitude Toward Debt scale, gender, and grade point average were not unique predictors of debt. Students reporting greater debt reported greater stress and decreased financial well being. Results highlight the need for comprehensive financial literacy education among college students" (Norvilitis et al. 2006, p. 1395).
"Using a sample of 1,354 students from a major southeastern university, results suggest that financial knowledge is a significant factor in the credit card decisions of college students. Students with higher scores on a measure of personal financial knowledge are more likely to engage in more responsible credit card use" (Robb 2011, p. 690)
"In all cases, a student’s use of credit cards strengthened the relationship between his or her attitude toward money and compulsive buying. This suggests that credit card usage exacerbates the problem of compulsive buying" (url=https://www.researchgate.net/profile/Ja ... udents.pdf]Roberts and Jones, 2001, p. 229-230[/url]).
+1
These are college students. Much of this forum is professionals. I, like many, have never paid a dime in cc interest, have reaped some substantial rewards, and have not seen any discernable change in spending since using cc's. I'm 36 and have only been using cc's for less than 2 years.
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Re: Dave Ramsey says don't use credit cards, even if you pay them off

Post by willthrill81 »

sciliz wrote: Mon Nov 20, 2017 7:56 pm
willthrill81 wrote: Mon Nov 20, 2017 4:23 pm
sciliz wrote: Mon Nov 20, 2017 1:09 pm
willthrill81 wrote: Sun Nov 19, 2017 6:31 pm DR's audience are middle class and working class Americans who have little to no financial literacy. Among much of this group, research has indeed shown that people will spend more if using a credit card instead of hard cash simply because it's easier for them to see how much money they have and are spending. Among the more financially literate, spending is the same regardless of the medium used.
Citation please?
I'm not trying to be a jerk. I did some Googling and I could find a large number of studies showing that people buy more with plastic, but I didn't see any that seemed to break it down by "financial literacy".
To be honest, from what I know about psychology and behavioral economics, I don't think it makes sense that it could work that way. At least if you are measuring "financial literacy" by knowledge and not by behavioral patterns.
See the three peer-reviewed articles below. Try Google Scholar instead.
"Lack of financial knowledge, age, number of credit cards, delay of gratification, and attitudes toward credit-card use were related to debt. Sensation seeking, materialism, the Student Attitude Toward Debt scale, gender, and grade point average were not unique predictors of debt. Students reporting greater debt reported greater stress and decreased financial well being. Results highlight the need for comprehensive financial literacy education among college students" (Norvilitis et al. 2006, p. 1395).
"Using a sample of 1,354 students from a major southeastern university, results suggest that financial knowledge is a significant factor in the credit card decisions of college students. Students with higher scores on a measure of personal financial knowledge are more likely to engage in more responsible credit card use" (Robb 2011, p. 690)
"In all cases, a student’s use of credit cards strengthened the relationship between his or her attitude toward money and compulsive buying. This suggests that credit card usage exacerbates the problem of compulsive buying" (url=https://www.researchgate.net/profile/Ja ... udents.pdf]Roberts and Jones, 2001, p. 229-230[/url]).
Sorry, the specific claim I am having trouble verifying is that "among the more financially literate spending is the same regardless of the medium used". I don't doubt that lack of financial knowledge can lead to debt, and that personal financial knowledge correlates with "more responsible credit card use". But you can use a credit card responsibly (never carry a balance, track and budget your spending) and still have it nudge your spending (e.g. spending $79.51 at the grocery store instead of $75- the worst wrinkle in the literature I read was that that extra plastic-related spending is likely to be on something unhealthy!).

For my own quirky psychology, I'm pretty sure if I made it a personal rule that I could only carry and spend $100 bills, I would spend the least (this has been termed the denomination effect). Hey! I know! I'll build a special wallet that makes those $100s really hard to get at, write a book explaining how to use it, call it the Rai stone approximation method (thanks Teague for that mental image!) and sell it on my website like Dave Ramsey :wink: !
I'm not able to lay my hands on the research showing that consumers tend with high financial literacy tend to treat all payment methods equally but I'm confident that I've seen it. Based on all of the data I'm seeing, it would certainly fit it with what we know about credit card use.
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Re: Dave Ramsey says don't use credit cards, even if you pay them off

Post by willthrill81 »

gvsucavie03 wrote: Mon Nov 20, 2017 8:42 pm
ThePrince wrote: Mon Nov 20, 2017 8:34 pm
willthrill81 wrote: Mon Nov 20, 2017 4:23 pm
sciliz wrote: Mon Nov 20, 2017 1:09 pm
willthrill81 wrote: Sun Nov 19, 2017 6:31 pm DR's audience are middle class and working class Americans who have little to no financial literacy. Among much of this group, research has indeed shown that people will spend more if using a credit card instead of hard cash simply because it's easier for them to see how much money they have and are spending. Among the more financially literate, spending is the same regardless of the medium used.
Citation please?
I'm not trying to be a jerk. I did some Googling and I could find a large number of studies showing that people buy more with plastic, but I didn't see any that seemed to break it down by "financial literacy".
To be honest, from what I know about psychology and behavioral economics, I don't think it makes sense that it could work that way. At least if you are measuring "financial literacy" by knowledge and not by behavioral patterns.
See the three peer-reviewed articles below. Try Google Scholar instead.
"Lack of financial knowledge, age, number of credit cards, delay of gratification, and attitudes toward credit-card use were related to debt. Sensation seeking, materialism, the Student Attitude Toward Debt scale, gender, and grade point average were not unique predictors of debt. Students reporting greater debt reported greater stress and decreased financial well being. Results highlight the need for comprehensive financial literacy education among college students" (Norvilitis et al. 2006, p. 1395).
"Using a sample of 1,354 students from a major southeastern university, results suggest that financial knowledge is a significant factor in the credit card decisions of college students. Students with higher scores on a measure of personal financial knowledge are more likely to engage in more responsible credit card use" (Robb 2011, p. 690)
"In all cases, a student’s use of credit cards strengthened the relationship between his or her attitude toward money and compulsive buying. This suggests that credit card usage exacerbates the problem of compulsive buying" (url=https://www.researchgate.net/profile/Ja ... udents.pdf]Roberts and Jones, 2001, p. 229-230[/url]).
+1
These are college students. Much of this forum is professionals. I, like many, have never paid a dime in cc interest, have reaped some substantial rewards, and have not seen any discernable change in spending since using cc's. I'm 36 and have only been using cc's for less than 2 years.
Then go out and see if you can replicate their results in older populations. :)
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