{"id":775,"date":"2016-02-22T12:11:56","date_gmt":"2016-02-22T17:11:56","guid":{"rendered":"http:\/\/www.investmentzen.com\/blog\/?p=775"},"modified":"2017-07-19T03:20:00","modified_gmt":"2017-07-19T07:20:00","slug":"ignore-dave-ramsey-credit-cards-are-not-evil","status":"publish","type":"post","link":"https:\/\/www.investmentzen.com\/blog\/ignore-dave-ramsey-credit-cards-are-not-evil","title":{"rendered":"Ignore Dave Ramsey \u2013 Credit Cards Are Not Evil"},"content":{"rendered":"

W<\/span>hen a Dave Ramsey article on credit cards popped up on my Facebook feed the other day, my interest was instantly piqued. While it\u2019s true that Ramsey\u2019s advice is generally solid and his lessons have been life-changing for many families, his views on using credit has always been puzzling. After all, Ramsey\u2019s stance on credit is to not use it under almost any circumstances<\/em>.<\/strong><\/p>\n

Reading his articles on credit always leaves me wondering. What do people who follow his advice do if they ever need to take out a mortgage for a home or borrow money to start a business?<\/p>\n

No Credit Score Needed?<\/h2>\n

Sadly, Ramsey\u2019s article<\/a> didn\u2019t do much to clear things up. In the piece for his blog, Ramsey lists six \u201cmyths\u201d about credit and dispels them one by one.<\/p>\n

First he shoots down the idea that credit is convenient \u2013 especially in emergencies, and next he denies that credit is easy to pay off every month. Since both of those ideas are fairly subjective, I won’t argue with those.<\/p>\n

However, another piece of Ramsey’s advice is downright dangerous \u2013 and it\u2019s one that relates back to his idea that you don\u2019t even need a credit to get by in life.<\/p>\n

\u201cYou can qualify for a mortgage and rent an apartment with zero credit (which will happen eventually if you stop borrowing altogether),\u201d writes Ramsey in his blog post. \u201cAnd for everything else\u2014even cars\u2014pay cash. No credit score needed.\u201d<\/strong><\/p>\n

Why You Might Need Credit<\/h2>\n

While paying cash for everything your entire life is a noble idea, it\u2019s not the reality for the majority of Americans. Paying cash for a cheap car is smart, but paying cash for a home can be close to impossible in all but a few circumstances.<\/p>\n

The idea you can qualify for a mortgage without any type of credit is, again, very puzzling. How are you supposed to get a mortgage without an established credit history?<\/p>\n

According to the U.S. Department of Urban Development<\/a>, it is actually possible to get a mortgage without much credit or a credit score. As their website notes, an FHA loan<\/a> can be an option when a lender agrees to use non-traditional credit scoring.<\/p>\n

When you don\u2019t have a credit card, this means they\u2019ll consider your payment history on other monthly bills, your down payment, and the cost of the home you plan to buy to determine whether you are credit-worthy.<\/p>\n

Still, this is certainly the hard road to take when it comes to buying a home and securing a mortgage \u2013 which is why it makes a lot more sense to take advantage of small amounts of credit to build a solid credit history over time.<\/p>\n

“Normally, (buying a home) requires credit, so establishing credit for that is very important,” financial planner Bob Morrison of Littleton, Colorado\u2019s Downing Street Wealth Management told Bankrate<\/a>. “You don’t want to go crazy and buy things that aren’t within your means, but at the same time, using credit prudently is wise.”<\/p>\n

Of course, there are plenty of ways to establish credit without an actual credit card. But if you\u2019re not taking out a car loan (ever) or borrowing money in any capacity, those other means will be much harder to come by. When you never borrow money \u2013 even for the sake of building credit \u2013 the paper trail known as your payment history can be almost nonexistent.<\/p>\n

A credit card, on the other hand, can show years of responsible credit use with almost no effort on your part \u2013 and even if you only use it infrequently. According to Ramsey\u2019s advice, however, you aren\u2019t \u201cadult enough\u201d to handle it, so why even try?<\/p>\nA credit card can show years of responsible credit use with almost no effort on your part <\/a><\/span>Click To Tweet<\/a><\/span>\n

Do Credit Card Rewards Actually Amount to Anything?<\/h2>\n

Another two \u201cmyths\u201d Ramsey shoots down are ones he simply doesn\u2019t understand. Why? Because he doesn\u2019t use credit to begin with.<\/p>\n

\u201cThey give us rewards, points, miles, or cash back!\u201d<\/p>\n

\u201cThey make our dreams reality!\u201d<\/p>\n

\u201cCredit card companies are marketing geniuses,\u201d writes Ramsey. \u201cWith rewards systems that appeal to just about anyone, they know exactly how to tempt you to sign up.\u201d<\/p>\n

\u201cBut no one ever got rich off a rewards program,\u201d notes Ramsey.<\/p>\n

While that may be true, credit card rewards do actually help people get ahead in myriad ways, and they even make some \u201cdreams\u201d come true – whether Ramsey wants to admit it or not.<\/p>\n

If you need convincing of that last part, just ask Brad Barrett of TravelMiles101.com and RichmondSavers.com. After starting his blog, Richmond Savers, several years ago, Brad got so deep in the world of travel rewards that he built an entire business around helping families get to Disney World on credit card rewards.<\/p>\n

A step-by-step instruction guide<\/a> he created on the topic has been featured everywhere from The New York Times to CBS and NBC. According to Barrett, his family has earned a grand total of 1.5 million points and miles which have been used to book some amazing family vacations over the years.<\/p>\n

As of now, that includes trips to Bermuda and all over the United States, and of course a huge extended-family trip to Disney World where even his parents got to come along.<\/p>\n

How To Make Credit Cards Work For You<\/h2>\n

They key to making this work, says Brad, is treating credit as if you were an adult \u2013 as in, acting responsibly and paying your bill in full every single month. <\/strong>Also, don’t use credit as an excuse to spend more. Just use your credit card for your everyday expenses, and – voila – you’ll earn points with almost no effort on your part.<\/p>\nDon't use credit as an excuse to spend more. <\/a><\/span>Click To Tweet<\/a><\/span>\n

\u201c<\/strong>We always treat our credit cards as if they were debit cards, so we make 100% sure we have the money to cover each and every purchase,\u201d notes Barrett. \u201cIf you change your mindset ever so slightly and stop thinking credit cards are inherently evil, you can see them as a wonderful financial tool that allows you to earn massive amounts of free travel<\/a>, fraud protection and eliminates the need to carry around cash.\u201d<\/p>\n

When it comes to making this strategy work for you, Barrett offers this advice:<\/p>\n

    \n
  1. You need to sit down and consider if this strategy is right for you personally. Experts can tell you it is the “right” thing to do, but if you aren’t comfortable with it, just continue avoiding credit cards.<\/li>\n
  2. Always pay your credit cards in full every single month. No amount of “free” travel is worth getting into debt for, so that is an absolutely essential thing to remember.<\/li>\n
  3. If you do decide it is something that can work for your life, then educate yourself on the points and miles that can best work for your travel plans and goals (Barrett and his team offer a free 15-day course<\/a> to help you get started)<\/li>\n<\/ol>\n

    At the end of the day, getting the most out of credit card rewards – whether that means earning cash back or scoring an amazing \u201cdream vacation\u201d every year – is dependent on your ability to handle credit responsibly and wisely.<\/p>\n

    For the most part, that means using credit only for purchases you planned to make anyway, being extremely diligent about paying down your bills, and taking the situation seriously.<\/p>\nGetting the most out of credit card rewards depends on your ability to handle credit responsibly <\/a><\/span>Click To Tweet<\/a><\/span>\n

    Why You Should Ignore Ramsey\u2019s Outdated Credit Advice<\/h2>\n

    Sadly, Ramsey doesn\u2019t think you\u2019re strong enough \u2013 or wise enough \u2013 to use credit in a safe and responsible way. He would rather have you avoid it altogether, possibly to the detriment of you owning a home in the next decade or longer.<\/p>\n

    And heaven forbid you see any rewards from credit, or included benefits many cards offer such as auto rental coverage, extended warranties, zero fraud liability, and even free FICO credit scores on your monthly statement.<\/p>\n

    You\u2019re just too simple-minded to grasp any of these concepts, charge your grocery bill on a credit card and pay it off every month, or keep track of your credit spending in any meaningful way.<\/p>\n

    If that last part describes you, then yes, you should avoid credit like the plague. But, what about everyone else?<\/p>\n

    While his intentions are always admirable, Ramsey forgets the fact that many of us are<\/em> intelligent and disciplined enough to see through the credit card marketing schemes – to actually put credit to work in our favor.<\/em><\/p>\n

    The money guru has it all wrong on this one. If used wisely, the power of credit cards can be harnessed as a valuable tool for your finances. Ramsey may not see it, but we all need to find, and live with, our own truth.<\/p>\n","protected":false},"excerpt":{"rendered":"

    Personal finance guru Dave Ramsey is well-known for taking a rabidly anti-debt stance. While his philosophy and advice has helped thousands of people get out of debt, can adopting his “cash only” stance actually cost you money?<\/p>\n","protected":false},"author":11,"featured_media":981,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_lmt_disableupdate":"","_lmt_disable":""},"categories":[93],"tags":[],"yoast_head":"\nIgnore Dave Ramsey \u2013 Credit Cards Are Not Evil - InvestmentZen<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.investmentzen.com\/blog\/ignore-dave-ramsey-credit-cards-are-not-evil\" \/>\n<meta name=\"twitter:label1\" content=\"Written by\" \/>\n\t<meta name=\"twitter:data1\" content=\"Holly Johnson\" \/>\n\t<meta name=\"twitter:label2\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data2\" content=\"7 minutes\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\/\/schema.org\",\"@graph\":[{\"@type\":\"WebPage\",\"@id\":\"https:\/\/www.investmentzen.com\/blog\/ignore-dave-ramsey-credit-cards-are-not-evil\",\"url\":\"https:\/\/www.investmentzen.com\/blog\/ignore-dave-ramsey-credit-cards-are-not-evil\",\"name\":\"Ignore Dave Ramsey \u2013 Credit Cards Are Not Evil - InvestmentZen\",\"isPartOf\":{\"@id\":\"https:\/\/www.investmentzen.com\/blog\/#website\"},\"datePublished\":\"2016-02-22T17:11:56+00:00\",\"dateModified\":\"2017-07-19T07:20:00+00:00\",\"author\":{\"@id\":\"https:\/\/www.investmentzen.com\/blog\/#\/schema\/person\/d7f36628b0696b9981f40e755bf0d2e8\"},\"breadcrumb\":{\"@id\":\"https:\/\/www.investmentzen.com\/blog\/ignore-dave-ramsey-credit-cards-are-not-evil#breadcrumb\"},\"inLanguage\":\"en-US\",\"potentialAction\":[{\"@type\":\"ReadAction\",\"target\":[\"https:\/\/www.investmentzen.com\/blog\/ignore-dave-ramsey-credit-cards-are-not-evil\"]}]},{\"@type\":\"BreadcrumbList\",\"@id\":\"https:\/\/www.investmentzen.com\/blog\/ignore-dave-ramsey-credit-cards-are-not-evil#breadcrumb\",\"itemListElement\":[{\"@type\":\"ListItem\",\"position\":1,\"name\":\"Home\",\"item\":\"https:\/\/www.investmentzen.com\/blog\/\"},{\"@type\":\"ListItem\",\"position\":2,\"name\":\"Credit Cards\"}]},{\"@type\":\"WebSite\",\"@id\":\"https:\/\/www.investmentzen.com\/blog\/#website\",\"url\":\"https:\/\/www.investmentzen.com\/blog\/\",\"name\":\"InvestmentZen\",\"description\":\"\",\"potentialAction\":[{\"@type\":\"SearchAction\",\"target\":{\"@type\":\"EntryPoint\",\"urlTemplate\":\"https:\/\/www.investmentzen.com\/blog\/?s={search_term_string}\"},\"query-input\":\"required name=search_term_string\"}],\"inLanguage\":\"en-US\"},{\"@type\":\"Person\",\"@id\":\"https:\/\/www.investmentzen.com\/blog\/#\/schema\/person\/d7f36628b0696b9981f40e755bf0d2e8\",\"name\":\"Holly Johnson\",\"image\":{\"@type\":\"ImageObject\",\"inLanguage\":\"en-US\",\"@id\":\"https:\/\/www.investmentzen.com\/blog\/#\/schema\/person\/image\/\",\"url\":\"https:\/\/secure.gravatar.com\/avatar\/b0d295f9857bcc5e3800911570a7fa20?s=96&d=mm&r=g\",\"contentUrl\":\"https:\/\/secure.gravatar.com\/avatar\/b0d295f9857bcc5e3800911570a7fa20?s=96&d=mm&r=g\",\"caption\":\"Holly Johnson\"},\"description\":\"Holly Johnson is a nationally recognized financial expert and award-winning writer whose obsession with frugality, budgeting, and travel plays a central role in her work. 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