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

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BW1985
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Re: Dave Ramsey says don't use credit cards, even if you pay them off

Post by BW1985 »

LEB1230 wrote: Sun Nov 19, 2017 7:27 pm
Devil's Advocate wrote: Sun Nov 19, 2017 7:05 pm Dave's number one sin is claiming one can safely withdraw 12% per year of retirement funds. However as of late he stays that even if I'm half right you'll still have plenty of money. A 6% withdrawal rate is also not a safe withdrawal rate.

DA
I've never heard him say that. He claims you can get an annual return of 12% on mutual funds. Not that you can safely withdraw 12% in retirement.
I have heard him say it.

I used to listen alot but its not enteraing anymore, there’s nothing new or thought provoking. Ive moved on to podcasts I can actually learn from like finanical indepence.
Last edited by BW1985 on Sun Nov 19, 2017 9:10 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 randomguy »

Dave Ramsey's advice (and to some extent 90% of the financial guru's) is all designed for people who lack financial discipline and how have shown an inabiltity to handle credit. Much like an alcoholic, going cold turkey might work best for them. The rest of us can enjoy the benefits of using it responsibly.
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Re: Dave Ramsey says don't use credit cards, even if you pay them off

Post by randomguy »

BW1985 wrote: Sun Nov 19, 2017 9:04 pm
LEB1230 wrote: Sun Nov 19, 2017 7:27 pm
Devil's Advocate wrote: Sun Nov 19, 2017 7:05 pm Dave's number one sin is claiming one can safely withdraw 12% per year of retirement funds. However as of late he stays that even if I'm half right you'll still have plenty of money. A 6% withdrawal rate is also not a safe withdrawal rate.

DA
I've never heard him say that. He claims you can get an annual return of 12% on mutual funds. Not that you can safely withdraw 12% in retirement.
I have heard him say it.

I think the number is 8% BUT and this is a big BUT I don't think he is talking 8% SWR. I think he is talking 8% of the portfolio. The odds of that not holding up (i.e. not resulting in you getting a declining standard of living over time) is still low but it isn't remotely as bad. But anyone who listens to DR for investing advice has far bigger problems than this. I assume they will all realize that they haven't made 12% over the previous 30 years and therefore are unlikely to get 12% over the next 30 years. But I mgiht be too optimistic:)
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Re: Dave Ramsey says don't use credit cards, even if you pay them off

Post by jhfenton »

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.
+1

Bogleheads milking credit cards for rewards without paying any interest charges are not his target audience, and other than coaching folks to get out of debt, he has no apparent expertise.

Most of the time I have no cash on my person. And I don't use my debit card for security reasons. That leaves credit cards.
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Re: Dave Ramsey says don't use credit cards, even if you pay them off

Post by Jack FFR1846 »

smitcat wrote: Sun Nov 19, 2017 8:50 pm FWIW - in all cases when we get a discount for cash we use cash but not too many folks are doing that right now.
Always do the math. I've done the math at gas stations where there's a discount for cash and so far, using my Chase AARP card that gives 3% back on gas, it's always cheaper to pay with credit. When I can save 5 cents a gallon for cash at $2.50 a gallon, I'll take the 7.5 cents from the credit card, thank you.

I call BS on the "spend more on credit" study. For people whose motto is "money ain't gonna spend itself", sure. For people who can manage money, no.

I would bet that when a credit card company sponsor's Dave's show, he'll all of a sudden change his tune and recommend the sponsor's card. Similar to his advisors (thieves) that he recommends and gets a kick back from.
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Re: Dave Ramsey says don't use credit cards, even if you pay them off

Post by munemaker »

Why would you care what Dave Ramsey thinks or says?
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Re: Dave Ramsey says don't use credit cards, even if you pay them off

Post by willthrill81 »

randomguy wrote: Sun Nov 19, 2017 9:10 pm
BW1985 wrote: Sun Nov 19, 2017 9:04 pm
LEB1230 wrote: Sun Nov 19, 2017 7:27 pm
Devil's Advocate wrote: Sun Nov 19, 2017 7:05 pm Dave's number one sin is claiming one can safely withdraw 12% per year of retirement funds. However as of late he stays that even if I'm half right you'll still have plenty of money. A 6% withdrawal rate is also not a safe withdrawal rate.

DA
I've never heard him say that. He claims you can get an annual return of 12% on mutual funds. Not that you can safely withdraw 12% in retirement.
I have heard him say it.

I think the number is 8% BUT and this is a big BUT I don't think he is talking 8% SWR. I think he is talking 8% of the portfolio. The odds of that not holding up (i.e. not resulting in you getting a declining standard of living over time) is still low but it isn't remotely as bad. But anyone who listens to DR for investing advice has far bigger problems than this. I assume they will all realize that they haven't made 12% over the previous 30 years and therefore are unlikely to get 12% over the next 30 years. But I mgiht be too optimistic:)
Even as a fixed percentage withdrawal, 8% is far too aggressive for even the best historical periods. The below graph from FIRECALC charts a beginning $1M portfolio with 8% withdrawals of the prior year's balance each year with an 80/20 allocation. This includes 117 periods, each 30 years in length.

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

Post by Nate79 »

randomguy wrote: Sun Nov 19, 2017 9:10 pm
BW1985 wrote: Sun Nov 19, 2017 9:04 pm
LEB1230 wrote: Sun Nov 19, 2017 7:27 pm
Devil's Advocate wrote: Sun Nov 19, 2017 7:05 pm Dave's number one sin is claiming one can safely withdraw 12% per year of retirement funds. However as of late he stays that even if I'm half right you'll still have plenty of money. A 6% withdrawal rate is also not a safe withdrawal rate.

DA
I've never heard him say that. He claims you can get an annual return of 12% on mutual funds. Not that you can safely withdraw 12% in retirement.
I have heard him say it.

I think the number is 8% BUT and this is a big BUT I don't think he is talking 8% SWR. I think he is talking 8% of the portfolio. The odds of that not holding up (i.e. not resulting in you getting a declining standard of living over time) is still low but it isn't remotely as bad. But anyone who listens to DR for investing advice has far bigger problems than this. I assume they will all realize that they haven't made 12% over the previous 30 years and therefore are unlikely to get 12% over the next 30 years. But I mgiht be too optimistic:)
Dave doesn't ever specifically recommend a particular mutual fund family (except once he let slip he uses American funds). But if you look at the average annual return over the last 30+ years for the fund that he indirectly recommends has been 12%+. I'm doubtful those funds will return the same over the next 30 but I think people underestimate what has been the historical return of these funds.

He also recommends only S&P500 index fund low fee no load in taxable accounts for tax efficiency.
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Re: Dave Ramsey says don't use credit cards, even if you pay them off

Post by Nate79 »

willthrill81 wrote: Sun Nov 19, 2017 9:36 pm
randomguy wrote: Sun Nov 19, 2017 9:10 pm
BW1985 wrote: Sun Nov 19, 2017 9:04 pm
LEB1230 wrote: Sun Nov 19, 2017 7:27 pm
Devil's Advocate wrote: Sun Nov 19, 2017 7:05 pm Dave's number one sin is claiming one can safely withdraw 12% per year of retirement funds. However as of late he stays that even if I'm half right you'll still have plenty of money. A 6% withdrawal rate is also not a safe withdrawal rate.

DA
I've never heard him say that. He claims you can get an annual return of 12% on mutual funds. Not that you can safely withdraw 12% in retirement.
I have heard him say it.

I think the number is 8% BUT and this is a big BUT I don't think he is talking 8% SWR. I think he is talking 8% of the portfolio. The odds of that not holding up (i.e. not resulting in you getting a declining standard of living over time) is still low but it isn't remotely as bad. But anyone who listens to DR for investing advice has far bigger problems than this. I assume they will all realize that they haven't made 12% over the previous 30 years and therefore are unlikely to get 12% over the next 30 years. But I mgiht be too optimistic:)
Even as a fixed percentage withdrawal, 8% is far too aggressive for even the best historical periods. The below graph from FIRECALC charts a beginning $1M portfolio with 8% withdrawals of the prior year's balance each year with an 80/20 allocation. This includes 117 periods, each 30 years in length.

Image
I would be curious can the software run the same scenario using the actual fund Dave indirectly recommends? (which is American funds growth fund)
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Re: Dave Ramsey says don't use credit cards, even if you pay them off

Post by Jags4186 »

I don’t think he’s being disingenuous when he says don’t use credit cards. Again let’s look at the facts:

Dave Ramsey #1 tenant to stay out of debt. Dave Ramsey’s primary audience is people with consumer debt. Dave Ramsey has a monetary incentive to not use credit cards. If he were caught using a credit card it would damage his credibility/business. If you told me I could make $X million a year to tell people credit cards and debt are awful I and I had to live a cash only lifestyle, you’d see me walking around with a money clip and nothing else.

There are so many things a credit card provides that are free that I wouldn’t pay for on my own but have used. I get two years additional extended warranty when I purchase something on my Citi Double Cash card. I bought my wife a new laptop for Christmas. 3 year total warranty from Dell would cost $199 additional. I get 3 years total warranty for $0 additional. I also get price protection, theft insurance, and damage insurance because I charged it.

When I rent a car I decline car insurance. When I was in Iceland I rented a car. They took a $5000 security deposit and wanted me to buy insurance to the tune of $100/day. If I used a debit card I’d need an extra $5000 in my checking account (I don’t even know if my debit card would allow a purchase that large) and I declined rental coverage. When I cracked the windshield and the rental car company charged me $750, Chase sent me a check for $750 3 weeks later because I was covered with my cards rental insurance.

There are so many products available to consumers that make life easier/save them money in the long run. You just need to be an educated consumer in order to take advantage of them. Credit cards require an educated consumer to truly take advantage.
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Re: Dave Ramsey says don't use credit cards, even if you pay them off

Post by scrabbler1 »

I can't say I disagree with the notion that buying with a CC can encourage more spending than using cash, for example. For the last few years, I have been using my CC most of the time when I do my grocery shopping, and even though I prepare a shopping list before I leave, I often buy a few more things than I had planned. But most of the time it is because one item in particular, boneless chicken, happens to be on sale at a deep discount from its usual price so I load up on several packages. This saves me at least $20 in a single visit, and I have never had to pay the regular price any more. It isn't like I am eating more of it, just being able to always pay less for it thanks to knowing that I am not limited to the cash in my wallet for how much I will spend there.

Another convenience has to do with my often buying some items for my ladyfriend. While she usually gives me cash when she gives me her shopping list, sometimes she doesn't. Knowing that I can use a CC makes this moot because she will pay me later and I can spend as much as I like. Sometimes, the store has coupons with $5 off on $50 purchases or $10 off on $100 purchases and thanks to the CC not limiting my purchase, I qualify for these nice discounts more than half the time now.

Being able to use a CC enables me to buy some vitally needed items on line which would cost a lot more in person at my local store.
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Re: Dave Ramsey says don't use credit cards, even if you pay them off

Post by willthrill81 »

Nate79 wrote: Sun Nov 19, 2017 9:41 pmI would be curious can the software run the same scenario using the actual fund Dave indirectly recommends? (which is American funds growth fund)
No, FIRECALC cannot incorporate specific tickers. Portfolio Visualizer can, but the problem is that there is insufficient data to do an analysis such as this with the American funds. Given that value outperformed growth over much of the historical period, it's almost certain that the results would be worse than what the FIRECALC analysis suggests.
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Re: Dave Ramsey says don't use credit cards, even if you pay them off

Post by Dottie57 »

You spend less if you don't go shopping. Cash or credit cards it doesn't matter.
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Re: Dave Ramsey says don't use credit cards, even if you pay them off

Post by fabis »

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?
you may spend 20% more with a credit card but unless you can account for every penny after a drive thru meal you are probably misplacing 20% in cash.
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Re: Dave Ramsey says don't use credit cards, even if you pay them off

Post by Lancelot »

hightower wrote: Sun Nov 19, 2017 5:35 pm 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?
Dave is an interesting character; he encourages people to save but insists that they are not intelligent enough to use credit cards responsibly. I've never spent more because of a credit card, but I have taken advantage of the sign up bonus arbitrage to get a first class air line suite :)
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Re: Dave Ramsey says don't use credit cards, even if you pay them off

Post by Greatness »

Dave is geared towards the general public whom do not know how to manage money; much less a budget. I use mint and place everything on cards. I already know what I am buying prior to going to a store. I am not a grazer, so I do not have to worry about over spending. (Most) Debt cards offer ZERO protection against fraudulent charges. Paypal can be a nightmare in a dispute situation. Here's a cute little story... Someone, some how, got ahold of one of my Fidelity CC's; which I sock draw. They placed a charge for travel within Mexico. I review my charges through direct and Mint near daily. I called up Fidelity (Elan Bank) and they took care of it. If this was through a debit card. I would be out several hundred dollars at least until the case is resolved. I do not carry a debt card, so I do not know exactly how it would work. However, I am sure it wouldn't be as easy as, again, there are no federal laws protecting debit card users. Yes, some banks do offer it, but many do not. Thus, I will continue to use credit cards and reap the thousands of points I get each and every year.

Again, Boglehead users are not really Dave Ramsey's target audience. I do not understand the guy who puts his cards in a safe deposit box, but to each their own.
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Re: Dave Ramsey says don't use credit cards, even if you pay them off

Post by Horsefly »

#1: After I heard DR a few times on the radio, it was obvious to me that his radio show / podcast is a money making machine. Unfortunately, I think that reduces the credibility of everything he says or does. His advice is often pointed in the direction of the things that bring him more money.

#2: As others have said, for the majority of his audience (non-boglehead, and very subject to over indulgence), advice like "don't use credit cards" is probably not bad by itself.

#3: Also as others have said, for those of us that can manage our spending with or without a credit card, as long as the credit card companies offer between 2% and 5% cash back for buying stuff we would be crazy to avoid it. We use our Fidelity Visa, Costco Visa, and Discover to pay for EVERYTHING. We almost never use cash, and almost never write checks except to pay our credit card bills (in full, every month).

I think DR either doesn't get #3, or knows that it doesn't work for most people listening to his program, or somehow has figured it doesn't make him any money.
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Re: Dave Ramsey says don't use credit cards, even if you pay them off

Post by Ragnoth »

Jags4186 wrote: Sun Nov 19, 2017 5:45 pm Regarding DR and credits cards its important to note who his audience is. 95% of it is broke people with consumer debt up to their eyeballs. Of course it’s much easier for him to say “yea never use credit cards” than to say “if you can’t handle credit cards you shouldn’t use them, but if you can it’s a great way to save 2% on all your purchases.”

Dave Ramsey doesn’t give tailored advice to people. He has cookie cutter responses to almost every scenario and he shoe horns everyone’s questions into those answer templates. He’s not going to lead you into a really bad place, but he almost never gives the optimal answer.
+1 more.

The show can be fun for some people, but unless you are up to your eyeballs in debt the only worthwhile advice will be to generally live beneath your means (e.g., by getting a cheaper car/house). Everything else is too simplistic, self-serving, or irrelevant.

Ask yourself: "Have I ever paid interest on a credit card balance?" If the answer is "no," you are not the intended audience for Ramsey's advice. Congrats on knowing how to manage debt, and feel free to take advantage of credit card rewards in a responsible manner. If the answer is "yes," his advice on credit cards is worth considering. Particularly if you are in the 1/3 of households that carry a balance from month-to-month.
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Re: Dave Ramsey says don't use credit cards, even if you pay them off

Post by HIinvestor »

Credit cards offer important protections at no extra charge, depending on the card. Thus may include travel insurance, extended warranty, loss protection, damage protection, car rental insurance and more.

I’ve gotten back over $1000 in cash back every year, plus some free airline trips and more. I’ve also gotten refunds when my product broke within the extended warranty period as well as when my D lost her brand new glasses in the ocean, reimbursement when we crack and replace our iPhone screen (up to twice/year), and full reimbursement for when the car we rented had its rear window smashed by a thief.

I would not have gotten these or comparable benefits if I had paid by other means and have no regrets and no intention of switching to a no CCard strategy.
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Re: Dave Ramsey says don't use credit cards, even if you pay them off

Post by NYC_Guy »

coincollector wrote: Sun Nov 19, 2017 6:25 pm Credit Cards were simply a money making invention of the financial industry that produce profits by encouraging irresponsible consumer habits and pushing asinine fees on them as a side dish. Even though that is true, the heart of the matter is that credit cards are just as antiquated as checks and cash. A debit card is a perfect one for one replacement but there are many modern replacements as well. From Paypal to Samsung/Android/Apple Pay to ACH or Wire. The list goes on and on. Credits Cards are unneeded in modern society and there is no reason to use one.
2% cash back is a very good reason. I’ve yet to see another non-cash payment solution provide that value. I also get a number of other benefits, including primary coverage on rental cars. And the fraud liability regime currently is better for cc than debit. For me, my primary checking account usually has a much higher balance than my primary cc credit limit, providing another anti-theft benefit. Those aren’t good reasons?
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Re: Dave Ramsey says don't use credit cards, even if you pay them off

Post by Houe »

Does anyone have any information on this study DR refers to? DR advocates using debit cards. I'd like to know if debit cards would be included as cash or plastic. If you pay your CC each month and maybe even link auto pay to your checking account the only difference between a debit card and CC is the CC is payed after a time delay. When I buy something whether it be via check/cash/cc/paypal/samsung pay etc it gets entered into my spreadsheet. My "pain" factor (as DR calls it) comes from excel not from the payment method used.

I do listen to DR mostly for his entertaining value. He is a good motivator to get/stay out of debt but you have to understand where he is coming from and who he is giving advice to. Take what you want and leave the rest for others.
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Re: Dave Ramsey says don't use credit cards, even if you pay them off

Post by BV3273 »

I agree with him if you have past issues with spending money you don’t have. Otherwise if it’s money you’re going to spend then use the cards and get yourself some points.
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Re: Dave Ramsey says don't use credit cards, even if you pay them off

Post by AntsOnTheMarch »

My wife and I are minimalists and get joy from NOT buying things. No way a cc is making us spend more.

That said, I think the advice is good because it will probably help 90+% of Americans. But it will probably help few bogleheads.

It’s a matter of know thyself.
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Re: Dave Ramsey says don't use credit cards, even if you pay them off

Post by Menger »

I think he can have a point for certain type of people. In my case I use CC extensively because it is convenient -always paying them off in full at the end of each month-, but I follow the "pay yourself first" strategy, which I think is the easiest way to build wealth and not feel bad for any purchase you made. As long as my % of annual savings is in line (now between 21-25% of net income, in 3 years when mortgage is paid off it will be around 40%), I'm fine. Is it possible that I may save 28% instead of -say- 23% by using credit cards? Very likely, but I don't really care, as my plans are proceeding allright.

I have read several DR books, and well, for his target audience they are ok, very straightforward, but that's about it.
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Re: Dave Ramsey says don't use credit cards, even if you pay them off

Post by grettman »

I am a regular listener of Dave because I like money talk. The stories make it interesting.

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

Post by Toons »

I think for the general population it is a good idea,
As it is easier to swipe a card than hand over cash.
Personally I use one cash back card and pay it off as soon as the expense hits the account,
Not an issue for me,just sayin :happy
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Re: Dave Ramsey says don't use credit cards, even if you pay them off

Post by Alexa9 »

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

Post by PaulMe »

Credit cards are like easy access to alcoholic beverages: a non-issue for most adults. Alcoholics should not hang out in bars. That being said, the vast majority of people who enjoy a drink now & again will be fine even if occasaionally they over indulge.

Of course there is the base reality that it is near impossible to do much of what we take for granted in 2017 (online commerce, travel) without a functioning credit card. Try checking into a hotel or renting a car (yes, it's possible, just a huge hassle without one).

Any one-size-fits-all approach should be viewed with great skepticism.
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Re: Dave Ramsey says don't use credit cards, even if you pay them off

Post by jimmyq »

I have the inverse problem. I've spent a great deal of my life saving money, and have been trying to loosen the purse strings a bit so that I can actually enjoy all the years of saving. Credit cards, very simply, help me spend my money. I find it much easier to buy things with a credit card without obsessing over the exact price of everything. So credit cards are a way to overcome the OCD aspects of extreme savers.
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Re: Dave Ramsey says don't use credit cards, even if you pay them off

Post by atfish »

Using cash or CCs should make no difference if U ask yourself before U buy something, is this a WANT or a NEED ????
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Re: Dave Ramsey says don't use credit cards, even if you pay them off

Post by Da5id »

I'm not a fan of Dave Ramsey. Once heard a clip of him ranting about something, that is my only direct exposure. I think that was enough.

That said, he has somewhat of a point. e.g. have a look at this article (and the linked studies): https://www.psychologytoday.com/blog/th ... redit-card. While individuals may vary, the data seems pretty good that most people spend more freely using CCs than using cash.

So even for the average boglehead, who doesn't have the other CC issue, running a balance and paying usurious levels of interest, it may be worth thinking about the fact that you probably spend more if using a CC rather than cash. That said, if you are saving the amount you want and overall feel in control of your spending, unclear that matters. Personally I pursue CC signup bonuses (2-3 new cards a year, hardly a hard core churner) and carry 6 cards and a cheat sheet of which to use on what, so probably Mr. Ramsey would say I should get coal in my stocking :)
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Re: Dave Ramsey says don't use credit cards, even if you pay them off

Post by The Wizard »

I think it's fine if Dave Ramsey has no credit cards...
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Re: Dave Ramsey says don't use credit cards, even if you pay them off

Post by tibbitts »

Well, Dave has been saying this since, it seems like, before credit cards had even been invented (how did he know?), so you have to give him points for being persistent.
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Re: Dave Ramsey says don't use credit cards, even if you pay them off

Post by Silk McCue »

The Wizard wrote: Mon Nov 20, 2017 8:42 am I think it's fine if Dave Ramsey has no credit cards...
He doesn't.

Anyone that wants to get a from the horse's mouth perspective on his philosophy read the following transcript from a call from his radio program. If you've never heard him I'd suggest you take the time to listen to the recording as it gives you a better sense of him. His advice isn't for everyone but is excellent for many.

https://www.daveramsey.com/askdave/debt ... t-card-use
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Re: Dave Ramsey says don't use credit cards, even if you pay them off

Post by JW-Retired »

hightower wrote: Sun Nov 19, 2017 5:35 pm 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 do buy it!

But DW and I won't change. Using cash or writing checks in lieu of credit cards would be a big pain.... and we don't want to spend less anyway.
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midareff
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Re: Dave Ramsey says don't use credit cards, even if you pay them off

Post by midareff »

We use cash back credit cards for everything possible. Cash and checks have simply become a PIA to use. Pockets full of change, a ledger of checks to balance.. phooey. AMEX Cash Preferred for 6% back on groceries, PenFed 5% back on gas, Fidelity Visa for 2% on everything else. Last three years we are averaging about $2300 a year cash back. All cards are set to autopay in full monthly and we don't buy anything on a card we would not have bought with cash anyway.

Edit: and Discover comes out for the three months a year they are 5% cash back at restaurants. Airline cards for domestic for free checked bags and priority boarding.
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Re: Dave Ramsey says don't use credit cards, even if you pay them off

Post by lostdog »

Please know that 7 out of 10 people in this country are leveraged to the max and live paycheck to paycheck. Bringing up the subject of personal finance to a group of friends while having a cold beer or get together is a no no. You'll get blank stares or someone will change the subject with a witty comment. They would rather talk about their kids or being busy working 60+ hours a week to make ends meet and wearing it as a badge of honor. This is engrained in our culture. Dave is the big elephant in the room that has to be a bit forceful with these people so they get it. Bogleheads and frugal investors are the minority in this country. We are the minority!

He sounds arrogant because these people act like little kids with money and he is their parent. This is a fact. It really is this bad out there. 7 out 10!!!
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Re: Dave Ramsey says don't use credit cards, even if you pay them off

Post by trueson1 »

Dave is right for people who can't manage money.

1. Use a budget (same whether you use a credit card or not)
2. Use a credit card that has good rewards (make money off your card)
3. If you can't pay off your credit card each month - don't use it. (Take a Dave Ramsey course - you need some basic financial advice)
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Re: Dave Ramsey says don't use credit cards, even if you pay them off

Post by BogleMelon »

One of the so many real life situations that happened to me while using my Credit Card:
I went to Walmart to buy a jar of jam. I knew I will use my credit card to pay for that.
Guess what I have bought in that day?
Well, just a jar of jam!
I am on a budget, and I spend based on the category balance, not based on my ability to spend, not based on the cash on my pocket or the plastic in my hand. I don't care about Dave Ramsey and those studies. Most people are not (budgeters) or Bogles anyways, thus the study is flawed.
Oh and I pay off my card every other day or so
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Re: Dave Ramsey says don't use credit cards, even if you pay them off

Post by stemikger »

To the OP. I am just like you and I disagree with Dave Ramsey on this.

I wrote this before in the past and this is how I feel about Dave.

Dave is someone who was a financial alcoholic in his past life. He discovered his version of a 12 step program (where they can no longer take a sip of alcohol because they are proven alcoholics). Many of the people who call him are financial alcoholics and have proven they are not responsible users of credit in any form).

Having said that, you and I have proven we can enjoy drinking (if we choose to) without becoming alcoholics. We have proven that we can use credit cards to our benefit and convenience without getting into long lasting credit card debt.
Last edited by stemikger on Mon Nov 20, 2017 11:13 am, 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 Point »

I use cash for all discretionary spending. I withdraw a fixed amount each week, when it’s gone, spending stops. I still use credit cards, and I track expenditures with personalcapital to see the expanse rate and keep it under control.

When budgets are tight, nothing moderates behavior better than cash.
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Re:Dave Ramsey says don't use credit cards, even if you pay them off

Post by AntsOnTheMarch »

lostdog wrote: Mon Nov 20, 2017 9:26 am Please know that 7 out of 10 people in this country are leveraged to the max and live paycheck to paycheck. Bringing up the subject of personal finance to a group of friends while having a cold beer or get together is a no no. You'll get blank stares or someone will change the subject immediately. This is engrained in our culture. Dave is the big elephant in the room that has to be a bit forceful with these people so they get it. Bogleheads and frugal investors are the minority in this country. We are the minority!

He sounds arrogant because these people act like little kids with money and he is their parent. This is a fact. It really is this bad out there. 7 out 10!!!
I have friends (a married couple in their late 50s-early 60s) who remodel their home and buy new cars and trucks on regular and frequent schedules. They never pay cash for anything. Never bought cars with cash (they lease or finance depending on what looks like a “good deal”). Sometimes they pull from their 401ks for the house remodels (loans, I guess, but there was once talk about taking $$ out and paying tax and penalties). When I ask about the rationale, they say that the market is a shell game and they may as well spend it before it disappears. They also regularly purchase other expensive toys, appliances, etc.

They both work at pretty good jobs but I would not consider them especially high paying jobs and at the same company. A few years ago, they went through a big scare when the company they worked for started layoffs and closed the location they were at. By some stroke of incredible luck, genius, or networking connections, they sold their home for the asking price, relocated to another state, and within 1.5 years, they had both secured equally good or better jobs (both at the the same company again!).

Now, during this job transition, they were preaching about how the American Dream was a con game and were talking about living like hermits in the woods. I thought for sure they’d gotten religion and would learn not to get into this trap again. It’s been a couple of years since they got the new jobs now and they are remodeling the kitchen and 2 bathrooms in their relatively new home, bought a truck, car, camper and other toys for the home.

The funny thing is, I think they will be ok. We don’t talk about finances much especially since they moved and are long distance now. But I believe that they have some sort of pensions at the current job and also from the old one. With SS and whatever they didn’t spend from their 401ks, they’ll probably end up better than I do. So I’m not sure there’s a lesson in here.
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Re: Dave Ramsey says don't use credit cards, even if you pay them off

Post by daytona084 »

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

As many have said, there are people for whom his warning applies. Here they are: https://vimeo.com/41152287
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Re: Dave Ramsey says don't use credit cards, even if you pay them off

Post by greg24 »

gvsucavie03 wrote: Sun Nov 19, 2017 6:06 pm
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?
Debit card...
If you are someone who spends 20% more using a credit card because it doesn't feel like "real money", I don't see your behavior with a debit card being much different.
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Re: Dave Ramsey says don't use credit cards, even if you pay them off

Post by Houe »

Da5id wrote: Mon Nov 20, 2017 8:38 am That said, he has somewhat of a point. e.g. have a look at this article (and the linked studies): https://www.psychologytoday.com/blog/th ... redit-card. While individuals may vary, the data seems pretty good that most people spend more freely using CCs than using cash.
Thanks for the link. That article is a bit ambiguous if it considers debit cards as cash or groups them with credit cards. The intro seems to group them together and then the specifics only talk about credit cards and don't mention debit cards. It does mention the time delay from purchase to payment tends to cause people to be disconnected and makes them overspend.
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Re: Dave Ramsey says don't use credit cards, even if you pay them off

Post by deltaneutral83 »

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.
Last edited by deltaneutral83 on Mon Nov 20, 2017 10:36 am, 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 juliewongferra »

alwayshedge wrote: Sun Nov 19, 2017 6:41 pm A few months ago, Dave called index investors dummies for falling for the passive strategy. He said that if you can't find someone that can beat the market, you're doing it wrong and it's your own fault. He then proceeded to recommend one of his preferred providers. I found this offensive. I stopped listening to him at that point and will recommend anyone else not to listen to him.
LOL, so off topic.

To completely dismiss him is silly. As others have said in this thread and other threads, his debt-avoiding discipline is advice that is reasonable (though not optimal) and especially reasonable for his target audience, who are not members of this Board.

Also, disagreeable people say smart things and smart people say disagreeable things. (Just search this board for the advice of Jack Bogle, a smart person, on not holding international funds, which is an opinion many people disagree with.) I'm not saying that Dave Ramsey is disagreeable person, but to completely eliminate him is silly. Just because some of his advice isn't suited for you doesn't mean that all his advice is unsuitable to all.

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 LateStarter1975 »

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.
He is an expert on getting people out of debt using his baby steps. I would think that is VERY relevant. Sure, we all agree his investing ideas suck, but his get-out-of debt method are probably one of the best around.
Debt is dangerous...simple is beautiful
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Re: Dave Ramsey says don't use credit cards, even if you pay them off

Post by vested1 »

I'll try to remember Dave Ramsey's cautionary tale when I'm in Hawaii for sixteen days starting this week, having my rental car and all fees/taxes entirely paid with CC rewards points. Then again, I guess I could have saved the additional amount needed for the rental with cash, rather than paying off my CC every month, simply buying what I would have bought anyway.
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Re: Dave Ramsey says don't use credit cards, even if you pay them off

Post by juliewongferra »

Maya1234 wrote: Sun Nov 19, 2017 6:38 pm Although I am at times personally uncomfortable with DR ( because he’s so religious and that is sometimes part of his message, while I’m an atheist ) I really do think that he gives very good advice on spending/debt and for many of his listeners, for whom debt and spending above their means has been a problem, this advice on credit cards makes a lot of sense. And it’s probably true that one spends more if they are paying with a CC but that is because the spending doesn’t feel as real. I solve that issue in part by monitoring my cc balance daily ( with daily e mail alerts) and transfering,that amount to a seperate “Bill paying” account. Paid in full of course. When you are reminded daily of your spending it feels more real at least to me. But I’m not going to miss out on rewards \money back. That’s a waste too
I get it, I'm an atheist also, but I don't let it get to me. For example, when he talks about the importance of tithing, I interpret that in my mind to be giving to charitable causes in general, not a specific amount (10%) to a specific institution (church). And if he cites the Bible as an authority on finances, I don't focus on the source as much as the message. Do I agree with the message? If so, then it doesn't matter if it came from the Gospel, from Dave Ramsey, from Jack Bogle, or from my Aunt Tilly. Good advice is good advice.

And sometimes he has a monologue about us not owning our wealth, but holding it for God (or something like that), and I just check back in 15 minutes when he's back to yelling at someone for leasing a $20K car when they have a $30K salary.

Dave Ramsey is good enough background noise--certainly better than some of the political talk shows!

cheers!
jwf
If you aren't familiar with Mr. Bogle and his investment philosophy, then you don't know Jack!
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