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

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Jags4186
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Re: Dave Ramsey says don't use credit cards, even if you pay them off

Post by Jags4186 »

ThePrince wrote: Mon Nov 20, 2017 8:32 pm
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.
Banks regularly put out promotions with unintended consequences. The smart people take advantage of them. Sometimes they are killed quickly. Sometimes the banks can’t figure it out.

Here are some off the top of my head that I took advantage of:

Discover running multiple concurrent promotions giving 22% cashback on Apple Pay purchases up to $10,000 in purchases
Mastercard giving $10 off purchases over $10 on Delivery.com. You think people split $50 orders into 5 $10 orders? (Killed within 2 days)
Capital One matching bonus points offered with proof of high airline point balance.
M&T Bank allowing unlimited reuse of new checking promotion codes. (Went on for months.)
Citi AA Platinum World -> World Elite conversion loop (went on for months)
gvsucavie03
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Re: Dave Ramsey says don't use credit cards, even if you pay them off

Post by gvsucavie03 »

willthrill81 wrote: Mon Nov 20, 2017 8:43 pm
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

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. :)
My point was bringing in some relevant stuff to this audience and also the evidence that Dave regularly cites.
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Re: Dave Ramsey says don't use credit cards, even if you pay them off

Post by BogleBoogie »

IMO, it comes down to the individual. If you require a cash budget to keep yourself honest, then the rewards from CCs aren't worth it. I have $504 rewards stacked on 1 of 5 of my credit cards. I've never carried a balance or paid interest. This is 2017, some place don't even accept cash! If you have the discipline, use the credit cards for the rewards/cash back and you'll get plenty of money back throughout the year.
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Re: Dave Ramsey says don't use credit cards, even if you pay them off

Post by LEB1230 »

Jags4186 wrote: Mon Nov 20, 2017 4:29 pm I certainly save more than Dave Ramsey recommends
What does he recommend?
Jags4186
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Re: Dave Ramsey says don't use credit cards, even if you pay them off

Post by Jags4186 »

LEB1230 wrote: Mon Nov 20, 2017 8:59 pm
Jags4186 wrote: Mon Nov 20, 2017 4:29 pm I certainly save more than Dave Ramsey recommends
What does he recommend?
15%
gvsucavie03
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Re: Dave Ramsey says don't use credit cards, even if you pay them off

Post by gvsucavie03 »

Jags4186 wrote: Mon Nov 20, 2017 9:07 pm
LEB1230 wrote: Mon Nov 20, 2017 8:59 pm
Jags4186 wrote: Mon Nov 20, 2017 4:29 pm I certainly save more than Dave Ramsey recommends
What does he recommend?
15%
Until house is paid off
LEB1230
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Re: Dave Ramsey says don't use credit cards, even if you pay them off

Post by LEB1230 »

Jags4186 wrote: Mon Nov 20, 2017 9:07 pm
LEB1230 wrote: Mon Nov 20, 2017 8:59 pm
Jags4186 wrote: Mon Nov 20, 2017 4:29 pm I certainly save more than Dave Ramsey recommends
What does he recommend?
15%
I believe that's just while you are doing steps 4, 5 and 6. Once you have college savings and your mortgage paid off you are then to up your investing as much as possible. Step 7 is build wealth and give.
investorpeter
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Re: Dave Ramsey says don't use credit cards, even if you pay them off

Post by investorpeter »

coincollector wrote: Sun Nov 19, 2017 6:25 pm Credits Cards are unneeded in modern society and there is no reason to use one.
Actually, I would say that cash is unneeded in modern society and there is no reason to use it. I rarely use cash anymore except for tipping while traveling. I actually get annoyed in lines when a person ahead of me pays with cash because it slows everything down. Only 10 years ago, it was the exact opposite - the person in line paying with the credit card was the one who slowed things down.

Also disagree with the thesis that credit cards necessarily encourage reckless spending. If used responsibly, credit cards are great for controlling expenses, much more so than cash. Credit cards allow one to track exact spending patterns down to the penny. Gone are the days of weekly ATM cash withdrawals that seemed to disappear into thin air. Now I know exactly how much I spend on groceries, coffee, gas, utilities, etc. etc., on a weekly, monthly and annual basis.
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Re: Dave Ramsey says don't use credit cards, even if you pay them off

Post by nathanfisher »

For people in debt, I think Dave Ramsey is amazing. I wish his retirement advice was more sound, however. Anyways, back to the topic:
hightower wrote: Sun Nov 19, 2017 5:35 pm Do you buy it?
- Yes. Unfortunately, several of my friends believe that getting points/small percentages back is highly rewarding when it rarely is.
hightower wrote: Sun Nov 19, 2017 5:35 pm Does this change your approach to using credit cards?
- Yes. It made me think deeper at the costs vs. benefits of using a credit card, especially in thinking: "How valuable are the rewards actually?" I don't like to fall into the opportunity cost attention trap of following "what categories do I need to throw money away at?" this month either.

:idea: Pardon my salt though. I do use a fidelity 2% back card that I look at twice a year. When it's in my hand it feels similar to my debit card, because I don't ever have to go to a points store to redeem anything or remember what categories are going on (equates to less psychological pleasure/reward). I might have a slightly anti-credit slant to my post due to my friends yolo'ing on restaurants and other purchases when they shouldn't due to their financial situation. On my fidelity account I literally named my card "lose money to buying" on the website.

...

Okay so I wanted to post a screenshot of my account titled "lose money to buying", but when I went I could not find the changed account name anymore. Also, my credit card now has a points store. :oops: Anyways, I guess I will continue letting the 2% auto-deposit into my account while I hope it doesn't influence my purchasing. :?
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Re: Dave Ramsey says don't use credit cards, even if you pay them off

Post by hoops777 »

Like everything else in life,there are people who use cc cards wisely and those who do not.Dave Ramsey is not important.
K.I.S.S........so easy to say so difficult to do.
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Re: Dave Ramsey says don't use credit cards, even if you pay them off

Post by White Coat Investor »

randomizer wrote: Sun Nov 19, 2017 5:38 pm I'd spend much less if I couldn't use credit cards. How would I get anything online?
Exactly. I already have a hard enough time spending money. I use credit cards to help me spend more and overcome my miserly ways! I bet there are plenty on this board that can relate.

But if you're having trouble getting your savings rate up like most of Ramsey's listeners seem to be, not using credit cards works pretty well.

There are lots of people (including in this thread) who will argue that they don't spend any more when they use cards (and in fact get rewards back.) There are also doctors who say pharma advertising doesn't affect what they prescribe. But for some reason pharma just keeps sending out the drug reps....
1) Invest you must 2) Time is your friend 3) Impulse is your enemy | 4) Basic arithmetic works 5) Stick to simplicity 6) Stay the course
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Re: Dave Ramsey says don't use credit cards, even if you pay them off

Post by Cheyenne »

Actually, I would say that cash is unneeded in modern society and there is no reason to use it.
Cash is useful to anyone who values his or her privacy. I cash a check every week and use it to pay for all sorts of things from groceries to medical bills. Where I shop and go to the doctor is none of my bank's business.
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Re: Dave Ramsey says don't use credit cards, even if you pay them off

Post by Da5id »

White Coat Investor wrote: Tue Nov 21, 2017 1:56 am There are lots of people (including in this thread) who will argue that they don't spend any more when they use cards (and in fact get rewards back.) There are also doctors who say pharma advertising doesn't affect what they prescribe. But for some reason pharma just keeps sending out the drug reps....
This is indeed Lake Wobegon, where we all are above average. And are stone cold robots, immune to normal human impulses and failings :)

That said, I think there are some flat out wins in the CC rewards front. I don't believe I consume more insurance, medicine, gas, or cell phone service due to the fact that I pay for all of those with rewards credit cards. My temple membership goes on the credit card, and the decision to be a member is I think independent of the fact that I don't need to bring a wheelbarrow of cash. But as to my other spending, I have no illusions myself...
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Re: Dave Ramsey says don't use credit cards, even if you pay them off

Post by basspond »

Most people on this board have will power and can see a long term financial goal that will take years and decades to achieve, those that don't need to quit cold turkey at a chance to achieve financial independence. I look at him as a personal trainer who is working to get someone in shape to do their first 5k, not as one to get someone into the Olympics.
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Re: Dave Ramsey says don't use credit cards, even if you pay them off

Post by smitcat »

Jags4186 wrote: Mon Nov 20, 2017 9:07 pm
LEB1230 wrote: Mon Nov 20, 2017 8:59 pm
Jags4186 wrote: Mon Nov 20, 2017 4:29 pm I certainly save more than Dave Ramsey recommends
What does he recommend?
15%
What is his 15% recommendation taken off of?
juliewongferra
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Re: Dave Ramsey says don't use credit cards, even if you pay them off

Post by juliewongferra »

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.
+1!!!

For a bunch of people who don't pay attention to Dave Ramsey, people sure know a lot about him!!

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

Post by BogleBoogie »

juliewongferra wrote: Tue Nov 21, 2017 9:41 am
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.
+1!!!

For a bunch of people who don't pay attention to Dave Ramsey, people sure know a lot about him!!

cheers,
jwf
Who is Dave Ramsey?
juliewongferra
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Re: Dave Ramsey says don't use credit cards, even if you pay them off

Post by juliewongferra »

BogleBoogie wrote: Tue Nov 21, 2017 9:59 am
juliewongferra wrote: Tue Nov 21, 2017 9:41 am
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.
+1!!!

For a bunch of people who don't pay attention to Dave Ramsey, people sure know a lot about him!!

cheers,
jwf
Who is Dave Ramsey?
^^^LOLOLOLOLOL
:D :D :D :D :D :D :D :D

cheers,
jwf
If you aren't familiar with Mr. Bogle and his investment philosophy, then you don't know Jack!
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Re: Dave Ramsey says don't use credit cards, even if you pay them off

Post by knpstr »

smitcat wrote: Mon Nov 20, 2017 5:12 pm A person can have no debt and have negative net worth or they can have 20,000 debt and be worth $10 million dollars.
That much is obvious (well except having a negative net worth and no debt). Perhaps I wasn't clear. His position of "no debt" is not purely for financial reasons (his own experience), but also comes from his religious views (Christianity).

For what it is worth, he covers that scenario you gave above in his additional steps (saving money/building your net worth). Actually saving a small amount is the first thing he tells someone to do.

In general, I think it is the case that those that proclaim having no debt is "not very important", usually have debt.

Different people may find Dave's views to be wrong or right. I was not trying to debate the merits of his views, merely give the reason why he thinks everyone should be debt-free.
Very little is needed to make a happy life; it is all within yourself, in your way of thinking. -Marcus Aurelius
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Re: Dave Ramsey says don't use credit cards, even if you pay them off

Post by Billionaire »

I was gonna buy a bunch of books and stuff off of his website using my credit card. I just saved a bunch of money.
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Re: Dave Ramsey says don't use credit cards, even if you pay them off

Post by CULater »

"You can fool some of the people all of the time, and all of the people some of the time and make a bunch of money while you're doing it" ~ Dave Ramsey
On the internet, nobody knows you're a dog.
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Re: Dave Ramsey says don't use credit cards, even if you pay them off

Post by flamesabers »

Billionaire wrote: Tue Nov 21, 2017 10:46 am I was gonna buy a bunch of books and stuff off of his website using my credit card. I just saved a bunch of money.
I thought you couldn't use credit cards to purchase his merchandise. If you can, doesn't it seem a bit odd considering his advice to not use credit cards? :?
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Re: Dave Ramsey says don't use credit cards, even if you pay them off

Post by willthrill81 »

Jags4186 wrote: Mon Nov 20, 2017 8:49 pmBanks regularly put out promotions with unintended consequences. The smart people take advantage of them. Sometimes they are killed quickly. Sometimes the banks can’t figure it out.

Here are some off the top of my head that I took advantage of:

Discover running multiple concurrent promotions giving 22% cashback on Apple Pay purchases up to $10,000 in purchases
Mastercard giving $10 off purchases over $10 on Delivery.com. You think people split $50 orders into 5 $10 orders? (Killed within 2 days)
Capital One matching bonus points offered with proof of high airline point balance.
M&T Bank allowing unlimited reuse of new checking promotion codes. (Went on for months.)
Citi AA Platinum World -> World Elite conversion loop (went on for months)
While not quite as lucrative as some of those, Barclay Card will currently give you 60,000 bonus miles for opening an Aviator card, make any purchase, and pay the annual fee.

Our net benefit in the 2017 calendar year for churning credit cards is going to be almost $6k in cash and near equivalents (i.e. airline miles). All after tax too. :D
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Re: Dave Ramsey says don't use credit cards, even if you pay them off

Post by misscourtneyk »

Dave Ramsey's advice is geared towards the average American who doesn't have much financial literacy and is mired in credit card debt. In that case, is swearing off credit cards wise? Probably. I would guess that most people on this forum already understand the principles of avoiding consumer debt and are focused on maximizing saving and making smart investment choices.

I personally tend to spend more money when I have cash than my credit card. In my mind, cash has already been deducted from my bank account and therefore is already "spent" in my mind. With my credit card, I know I'll have to pay it at the end of the month and I tend to be more stingy with my purchases. I have a budget and I pay off my card in full every month. The airline rewards I get are well worth it, and I'm building credit at the same time which allowed me to get a stupidly low interest rate on my home mortgage.

I don't think things are as black and white as Dave makes them seem. i.e. I'm choosing not to pay down my mortgage early, against Dave's advice. My mortgage interest rate is only 3.3%, but I'm averaging 16% return across my investment portfolio this year. No way am I paying my mortgage down early right now.
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Re: Dave Ramsey says don't use credit cards, even if you pay them off

Post by sciliz »

White Coat Investor wrote: Tue Nov 21, 2017 1:56 am
randomizer wrote: Sun Nov 19, 2017 5:38 pm I'd spend much less if I couldn't use credit cards. How would I get anything online?
Exactly. I already have a hard enough time spending money. I use credit cards to help me spend more and overcome my miserly ways! I bet there are plenty on this board that can relate.

But if you're having trouble getting your savings rate up like most of Ramsey's listeners seem to be, not using credit cards works pretty well.

There are lots of people (including in this thread) who will argue that they don't spend any more when they use cards (and in fact get rewards back.) There are also doctors who say pharma advertising doesn't affect what they prescribe. But for some reason pharma just keeps sending out the drug reps....
:thumbsup
Apparently, pharma spends $5 billion/year on promotions.
Apparently, banks spent $22.6 billion last year on rewards. Either banks are very bad at money, or, on average, those companies make a lot out of those cards.
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Re: Dave Ramsey says don't use credit cards, even if you pay them off

Post by deltaneutral83 »

One of you needs to call in on the millionaire hour and tell him that half your wealth is from credit card points, the other half is inherited, and that it's all invested in Bit Coin and Index Funds. Then segue into asking Ramsey if he wants your referral link to your Chase Sapphire Reserve so you can pocket 10,000 points for the referral.
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Re: Dave Ramsey says don't use credit cards, even if you pay them off

Post by bloom2708 »

I like most of Dave Ramsey's advice.

His target audience is not the typical Boglehead reader. If you have a good salary, low debt and are "killing it Boglehead style", then you probably don't have to follow his advice on debt or credit card usage.

We use a couple "rewards" credit cards and pay them off monthly (multiple times per month).

Do we spend more because it is super easy, fast and simple to "swipe". Absolutely. You are kidding yourself if you don't think you spend more.

Go out shopping with only $X cash. Or only with cash and your checkbook with only $x in your account. You can't spend more than you have. You have to go get that cash. You have to plan. Even if payday is only Y days away and you'll have the money then.

Small, medium or large impulse purchases can happen at any time. Just swipe and worry about it later. No comparison shopping, no "I'll wait and see if I really need this" time.

If you really want to outsmart yourself, then use credit cards as little as possible. If you don't care or "good enough" is good enough, then use them freely and tell us about your $10k trips all bought with reasonable spending on your reward cards. Easy as that.
"We are here to provoke thoughtfulness, not agree with you." Unknown Boglehead
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Re: Dave Ramsey says don't use credit cards, even if you pay them off

Post by investingdad »

hightower wrote: Sun Nov 19, 2017 5:35 pm This is from a segment 1 year ago
https://www.youtube.com/watch?v=np5i5oWfqAo

Do you all agree with Dave on this? He says that it's stupid to use credit cards even in situations where you use credit cards for rewards points (credit card hacking) and pay them off each month without paying any interest. His argument is that there have been studies done that show people spend more when they use plastic then they would if they used only cash.
Do you buy it? Does this change your approach to using credit cards?

I personally use my credit card like a checking account and make sure the balance is paid in full each month. But, if these studies he refer to are correct and I'm actually spending 20% more than I would if I forced myself to use cash, then I'd be interested in trying a new approach. It seems to make sense to me when I envision myself being forced to take out cash every time I want to buy something. Especially when it comes to food and groceries. I think I'd spend less.

What does every else think?
BHs are not his audience... irrelevant for most here.
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Re: Dave Ramsey says don't use credit cards, even if you pay them off

Post by SmileyFace »

I've read some of the studies and don't believe I'm spending 20% more by using CCs for everything - but even if I am - I am meeting all my savings goals so who cares. I can't see giving up the 2% cashback on everything (and 5% at Amazon) - the CC transaction fees are already built into the costs of retail items and services so I don't want to miss getting my share back.
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Re: Dave Ramsey says don't use credit cards, even if you pay them off

Post by WhiteMaxima »

If using cash, I would ask for a 2~3% discount from vendor since I saved them fees.
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Re: Dave Ramsey says don't use credit cards, even if you pay them off

Post by jlcnuke »

Dave Ramsey's advice is exceptionally helpful "to his target audience".

His target audience is not "financially responsible people who stick to a budget and spend responsibly as a force of habit". His target audience is "people who have leveraged themselves into significant debt and who do not have the financial willpower to overcome such problems without being given constant gratification and strict rules to abide by".

Is it financially "best" to pay off low interest debt while accumulating interest on high interest loans? Heck no. That hurts your net worth, it doesn't help it. However, it gives people with little willpower (financially at least) motivation to continue on a "better" path than their previous "rack up debt irresponsibly" course of actions.

People who need such assistance aren't "generally" going to have the long-term financial willpower to avoid going back into debt if they keep that temptation around. So, the best "general" advice is to avoid the temptation by ignoring the potential benefits and focus on the potential negatives (you *may* spend more, you *may* go back to getting into CC debt, etc).

That's good advice "for that audience" imo.

I set my savings amounts. I pay my bills. I then spend the rest of my income on "whatever" I feel like. I'm going to do that with or without credit cards. Using credit cards that "give back" to me has zero downsides. I'm not going to spend myself into debt on credit cards. I'm not going to overspend on my credit cards. I'm not going to "spend more" because I'm using a credit card. For me, Dave's advice is obviously bad (as it takes the rewards away without providing any reciprocal benefit). That doesn't mean it's bad advice for everyone though.

Telling me it's okay to go ahead and enjoy a drink or two while I'm out on Friday night isn't "bad" advice. Telling an alcoholic it's okay to go ahead and enjoy a drink or two while out on Friday night would generally be considered bad advice however. It's the same advice, but the "type" of person it's geared to matters in determining if it's a good or bad thing. The target audience matters.
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Re: Dave Ramsey says don't use credit cards, even if you pay them off

Post by jlcnuke »

WhiteMaxima wrote: Tue Nov 21, 2017 12:46 pm If using cash, I would ask for a 2~3% discount from vendor since I saved them fees.
Does Wal-Mart give you a 2-3% discount when you pay cash? Lowes? Publix? etc?
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Re: Dave Ramsey says don't use credit cards, even if you pay them off

Post by WhiteMaxima »

jlcnuke wrote: Tue Nov 21, 2017 12:55 pm
WhiteMaxima wrote: Tue Nov 21, 2017 12:46 pm If using cash, I would ask for a 2~3% discount from vendor since I saved them fees.
Does Wal-Mart give you a 2-3% discount when you pay cash? Lowes? Publix? etc?
I knew many gas stations do. In many places on this planet, cash is the only payment method.
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Re: Dave Ramsey says don't use credit cards, even if you pay them off

Post by jlcnuke »

WhiteMaxima wrote: Tue Nov 21, 2017 1:15 pm
jlcnuke wrote: Tue Nov 21, 2017 12:55 pm
WhiteMaxima wrote: Tue Nov 21, 2017 12:46 pm If using cash, I would ask for a 2~3% discount from vendor since I saved them fees.
Does Wal-Mart give you a 2-3% discount when you pay cash? Lowes? Publix? etc?
I knew many gas stations do. In many places on this planet, cash is the only payment method.
I know of one gas station in my area that has separate prices for cash vs credit (and there is no "asking" for it, it's just different prices). I know of zero businesses which enable cashiers to drop 2-3% off the prices because someone asks them to when they are paying cash. I don't know of any national/regional businesses which tell managers they can just drop prices by 2-3% because someone with cash asks them to. Ask an associate at Target or Lowes or Dollar General etc to give you a 2-3% discount because you're not racking up credit card fees and I'd be monumentally surprised if any such discount was given. Though I wouldn't be surprised if the people in line behind you got annoyed having to wait for a manager to be called to tell you they don't give any such discount.
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Re: Dave Ramsey says don't use credit cards, even if you pay them off

Post by Jags4186 »

jlcnuke wrote: Tue Nov 21, 2017 3:28 pm
WhiteMaxima wrote: Tue Nov 21, 2017 1:15 pm
jlcnuke wrote: Tue Nov 21, 2017 12:55 pm
WhiteMaxima wrote: Tue Nov 21, 2017 12:46 pm If using cash, I would ask for a 2~3% discount from vendor since I saved them fees.
Does Wal-Mart give you a 2-3% discount when you pay cash? Lowes? Publix? etc?
I knew many gas stations do. In many places on this planet, cash is the only payment method.
I know of one gas station in my area that has separate prices for cash vs credit (and there is no "asking" for it, it's just different prices). I know of zero businesses which enable cashiers to drop 2-3% off the prices because someone asks them to when they are paying cash. I don't know of any national/regional businesses which tell managers they can just drop prices by 2-3% because someone with cash asks them to. Ask an associate at Target or Lowes or Dollar General etc to give you a 2-3% discount because you're not racking up credit card fees and I'd be monumentally surprised if any such discount was given. Though I wouldn't be surprised if the people in line behind you got annoyed having to wait for a manager to be called to tell you they don't give any such discount.
That’s because it’s a myth that cash transactions are free to the merchant. Places like Target have to worry about theft (by employees and off the street thieves), lost money, miscounted change, counterfeit bills, and paying people to travel to the bank with the money. Sheriffs can also levy on a store’s cash registers/store’s safes closing the business for the day essentially.
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Re: Dave Ramsey says don't use credit cards, even if you pay them off

Post by Da5id »

jlcnuke wrote: Tue Nov 21, 2017 3:28 pm I know of one gas station in my area that has separate prices for cash vs credit (and there is no "asking" for it, it's just different prices). I know of zero businesses which enable cashiers to drop 2-3% off the prices because someone asks them to when they are paying cash. I don't know of any national/regional businesses which tell managers they can just drop prices by 2-3% because someone with cash asks them to. Ask an associate at Target or Lowes or Dollar General etc to give you a 2-3% discount because you're not racking up credit card fees and I'd be monumentally surprised if any such discount was given. Though I wouldn't be surprised if the people in line behind you got annoyed having to wait for a manager to be called to tell you they don't give any such discount.
I have a local restaurant that gives a 10% discount for cash. Whether they are paying sales/business income tax on that cash I guess is for them to know and the state government to find out.

Most bigger places/chains don't give a discount for cash. It at least used to be oddly against the card issuer rules to surcharge for using a credit card, but OK to give a discount for using cash (how are those different in practice?). Not sure where that is these days though.
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Earl Lemongrab
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Re: Dave Ramsey says don't use credit cards, even if you pay them off

Post by Earl Lemongrab »

Jags4186 wrote: Tue Nov 21, 2017 3:44 pm That’s because it’s a myth that cash transactions are free to the merchant. Places like Target have to worry about theft (by employees and off the street thieves), lost money, miscounted change, counterfeit bills, and paying people to travel to the bank with the money. Sheriffs can also levy on a store’s cash registers/store’s safes closing the business for the day essentially.
Also counterfeit money. You can negotiate cash discounts in some cases. If you're buying electronics or appliances at a smaller outfit, they might be willing. But in general the opportunity to get discounts is not widespread. Credit fees are just part of the cost built in to the retail system for the most part. You're already paying, might as well take advantage.
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Re: Dave Ramsey says don't use credit cards, even if you pay them off

Post by Earl Lemongrab »

Da5id wrote: Tue Nov 21, 2017 3:58 pm I have a local restaurant that gives a 10% discount for cash. Whether they are paying sales/business income tax on that cash I guess is for them to know and the state government to find out.
Yeah, that's above what they'd be paying in fees. I had a plumber offer me $50 off if I paid in bills instead of check. His reason was that it was Friday and they weren't going to be done until late so this way he could give his guys some cash for the weekend. I had my doubts, but $50 to take a short run to the bank? I'll do that.
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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: Tue Nov 21, 2017 4:02 pm Yeah, that's above what they'd be paying in fees. I had a plumber offer me $50 off if I paid in bills instead of check. His reason was that it was Friday and they weren't going to be done until late so this way he could give his guys some cash for the weekend. I had my doubts, but $50 to take a short run to the bank? I'll do that.
As long as you like the guy. If the work ended up being shoddy and he didn't come back to fix it, having paid by CC does give you the recourse of disputing. Separate from the "do I spend more question", CCs do have that going for them. I've in fact only used ability to chargeback a few times in my life, but knowing it can be done and the CC company is usually on your side can be reassuring.
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Re: Dave Ramsey says don't use credit cards, even if you pay them off

Post by azanon »

It's good advice for someone who's been bankrupt due to excessive debt to avoid using debt, just like it's good advice for a recovering alcoholic to avoid drinking alcohol all-together.

However, there are also some of us that are responsible with debt and are not alcoholics, so the same advice doesn't apply to us. But you'll always have people that had such terrible experiences with debt/alcohol, that they can never really see how they could be beneficial, or at least not harmful to someone else.

Dave is one of these people.
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Re: Dave Ramsey says don't use credit cards, even if you pay them off

Post by hoops777 »

Da5id wrote: Tue Nov 21, 2017 7:44 am
White Coat Investor wrote: Tue Nov 21, 2017 1:56 am There are lots of people (including in this thread) who will argue that they don't spend any more when they use cards (and in fact get rewards back.) There are also doctors who say pharma advertising doesn't affect what they prescribe. But for some reason pharma just keeps sending out the drug reps....
This is indeed Lake Wobegon, where we all are above average. And are stone cold robots, immune to normal human impulses and failings :)

That said, I think there are some flat out wins in the CC rewards front. I don't believe I consume more insurance, medicine, gas, or cell phone service due to the fact that I pay for all of those with rewards credit cards. My temple membership goes on the credit card, and the decision to be a member is I think independent of the fact that I don't need to bring a wheelbarrow of cash. But as to my other spending, I have no illusions myself...
Exactly.I pay all our phone,tv,internet bills,gas,Medicare,car insurance,home insurance,health insurance,,etc,etc.I Also was able to buy my inventory when I had my small business which has turned out quite well regarding our travel expenses.
CC’s used the right way actually cut your expenses.
K.I.S.S........so easy to say so difficult to do.
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Re: Dave Ramsey says don't use credit cards, even if you pay them off

Post by knpstr »

azanon wrote: Tue Nov 21, 2017 4:15 pm It's good advice for someone who's been bankrupt due to excessive debt to avoid using debt, just like it's good advice for a recovering alcoholic to avoid drinking alcohol all-together.

However, there are also some of us that are responsible with debt and are not alcoholics, so the same advice doesn't apply to us. But you'll always have people that had such terrible experiences with debt/alcohol, that they can never really see how they could be beneficial, or at least not harmful to someone else.

Dave is one of these people.
To be fair to your analogy, it is best to avoid all alcohol consumption. But it may be safe to drink up to two drinks a day for men and one drink a day for women, according to American Institute for Cancer Research.
Very little is needed to make a happy life; it is all within yourself, in your way of thinking. -Marcus Aurelius
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Re: Dave Ramsey says don't use credit cards, even if you pay them off

Post by ChrisC »

bloom2708 wrote: Tue Nov 21, 2017 12:20 pm
Do we spend more because it is super easy, fast and simple to "swipe". Absolutely. You are kidding yourself if you don't think you spend more.

Go out shopping with only $X cash. Or only with cash and your checkbook with only $x in your account. You can't spend more than you have. You have to go get that cash. You have to plan. Even if payday is only Y days away and you'll have the money then.
Well, you’re just simply demonstrating that some people, who can’t afford to pay from existing cash or checking accounts, use credit to make purchases. I think this is what DR is suggesting people not do.

This is something qualitatively different from saying that people who can afford to pay for purchases from existing cash or checking accounts overspend because of credit cards. In other words, for those people who can use existing cash or checking accounts to pay for consumer goods, do they overspend because they can put the purchase on a credit card? I doubt the financial literate in that class of people overspend as a result of credit. (Spending on housing might be different because the default transaction is a leveraged, credit borrowing for housing, and perhap a bigger line of housing credit/mortgage could result in overextending oneself, i.e., buying more house than you can afford.)

Now, I’m willing to say that the convenience of paying by credit cards, the anti-fraud, tracking/monitoring record keeping and reward programs make me pay by credit card rather than cash or checking, but I seriously doubt I am making purchases because of a credit card in my wallet.
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Re: Dave Ramsey says don't use credit cards, even if you pay them off

Post by azanon »

knpstr wrote: Tue Nov 21, 2017 4:48 pm
azanon wrote: Tue Nov 21, 2017 4:15 pm It's good advice for someone who's been bankrupt due to excessive debt to avoid using debt, just like it's good advice for a recovering alcoholic to avoid drinking alcohol all-together.

However, there are also some of us that are responsible with debt and are not alcoholics, so the same advice doesn't apply to us. But you'll always have people that had such terrible experiences with debt/alcohol, that they can never really see how they could be beneficial, or at least not harmful to someone else.

Dave is one of these people.
To be fair to your analogy, it is best to avoid all alcohol consumption. But it may be safe to drink up to two drinks a day for men and one drink a day for women, according to American Institute for Cancer Research.
I've read that 1-2 glasses of red wine a day for men, and up to 1 glass a day for women is healthier than 0 glasses. So not only, not harmful, but beneficial. And one of the two benefits is the alcohol units itself. Cursory google searches would provide credible sources for this (if you insist, I could provide them, and probably will be multiple studies).

But I'm willing to concede just "not harmful", despite researching showing its beneficial; just like my 2.5% cash back USAA card is beneficial.

There's more that's relevant to overall health than just your chances of getting cancer.
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Re: Dave Ramsey says don't use credit cards, even if you pay them off

Post by VictoriaF »

Mudpuppy wrote: Sun Nov 19, 2017 6:09 pm This advice is intended for Dave Ramsey's target audience: people who have trouble staying within their means for their spending. In that context, a credit card might be like having alcohol in the house of a recovering alcoholic... it could all turn out just fine, but why add the temptation? That doesn't mean credit cards are bad for everyone, just some people can't handle them responsibly and would be better off with cash or debit cards.
Good point.

I favor social-studies findings derived from control experiments over subjective perceptions. Daniel Kahneman uses a concept of What You See Is All There Is (WYSIATI). You notice when you control your spending; you don't notice it when you don't. However. for most Bogleheads, slight overspending with reward credit cards is more than compensated by travel savings.

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

Post by Earl Lemongrab »

Da5id wrote: Tue Nov 21, 2017 4:08 pm
Earl Lemongrab wrote: Tue Nov 21, 2017 4:02 pm Yeah, that's above what they'd be paying in fees. I had a plumber offer me $50 off if I paid in bills instead of check. His reason was that it was Friday and they weren't going to be done until late so this way he could give his guys some cash for the weekend. I had my doubts, but $50 to take a short run to the bank? I'll do that.
As long as you like the guy. If the work ended up being shoddy and he didn't come back to fix it, having paid by CC does give you the recourse of disputing. Separate from the "do I spend more question", CCs do have that going for them. I've in fact only used ability to chargeback a few times in my life, but knowing it can be done and the CC company is usually on your side can be reassuring.
I don't think credit card was even an option. It was basically check or greenbacks. But he did a good job (this was running gas lines through the attic).
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Earl Lemongrab
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Re: Dave Ramsey says don't use credit cards, even if you pay them off

Post by Earl Lemongrab »

VictoriaF wrote: Tue Nov 21, 2017 5:05 pm I favor social-studies findings derived from control experiments over subjective perceptions. Daniel Kahneman uses a concept of What You See Is All There Is (WYSIATI). You notice when you control your spending; you don't notice it when you don't. However. for most Bogleheads, slight overspending with reward credit cards is more than compensated by travel savings.
But paying cash is not the only way to control spending. It's not even the best way, in my opinion. I've mentioned before that I carefully consider every expenditure either by class (some things I've decided are always buys) or specific instance. Every cent that leaves my pocket, literal or otherwise, I know where it is going and why. THAT is how you control spending. Then how you pay is irrelevant to what you spend.
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Re: Dave Ramsey says don't use credit cards, even if you pay them off

Post by H-Town »

hightower wrote: Sun Nov 19, 2017 5:35 pm This is from a segment 1 year ago
https://www.youtube.com/watch?v=np5i5oWfqAo

Do you all agree with Dave on this? He says that it's stupid to use credit cards even in situations where you use credit cards for rewards points (credit card hacking) and pay them off each month without paying any interest. His argument is that there have been studies done that show people spend more when they use plastic then they would if they used only cash.
Do you buy it? Does this change your approach to using credit cards?

I personally use my credit card like a checking account and make sure the balance is paid in full each month. But, if these studies he refer to are correct and I'm actually spending 20% more than I would if I forced myself to use cash, then I'd be interested in trying a new approach. It seems to make sense to me when I envision myself being forced to take out cash every time I want to buy something. Especially when it comes to food and groceries. I think I'd spend less.

What does every else think?
It's very ill-advised thing to say from Dave Ramsey. I use credit cards to take advantage of things that I can't have by using cash, such as extended warranty, fraud protection, return purchase, interest-free float, hassle free foreign exchange. When I use cash I tend to lose changes; whereas everything is exact in penny when I use cards. I don't need to use cash to control my spending. I have a budget for that.
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Re: Dave Ramsey says don't use credit cards, even if you pay them off

Post by TD2626 »

I think that sometimes one has to live in the world that exists, not an ideal world that they wish existed. In this world, credit scores are commonly used (for ridiculous things that have nothing to do with debt repayment - like insurance rates and job applications). Thus, it can be helpful to have a credit score instead of being unscorable due to having no previous credit history. One would need to be very behaviorally disciplined to have a credit card - to the point where being excessively frugal was an issue in your life. I feel many on this site are potentially at that level, so it's probably not likely that the credit card would stimulate excessive spending. Essentially, if you have a net worth mentality instead of an income/cashflow mentality, you see that adding the debt on a credit card decreases your net worth just as much as putting it on a debit card --- and if you pay off the credit card immediately after every purchase (and get rewards/cashback) you could be slightly better off with a credit card. I don't think, though, that the fraud protections are sufficiently different to favor a credit card over a debit card - debit cards have decent fraud protections provided notification is prompt.
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Re: Dave Ramsey says don't use credit cards, even if you pay them off

Post by TomCat96 »

Dave Ramsey is catering the to average american with zero financial literacy. For them indeed, it is safer to rule out credit cards all together.

You are a person with a brain. You know yourself. You know your habits. You know whether you can control your own spending or not. It's that simple.

But if you need the voice of a person to tell you no credit cards because you need an authoritative black and white rule then so be it.

For the rest of us, it's:

-Spend money. -Get some points. Pay back balance in full each month. It's an issue of personal restraint. not economic analysis.

There is no need to get into studies. There is no need to post research on the average american. There is no need to analyze the finer theoretical implications. There is no need to parse words and figure out what Dave Ramsey "really" means.
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