Why Dave Ramsey is Both Right and Wrong on Credit Cards

Mar 6, 2018

This post contains references to products from one or more of our advertisers. We may receive compensation when you click on links to those products. Terms apply to the offers listed on this page. For an explanation of our Advertising Policy, visit this page.

We at TPG get dozens of tips and requests for stories each day. We can’t tackle them all, but one popped into our inbox this weekend that I personally just couldn’t ignore:

“I find great value in what you do. I was recently in a argument with another that in no uncertain terms said you were “full of it”. The reasons he gave were based on a Dave Ramsey video. Can you please show where this course of thinking is wrong? It is good for all to be aware of both sides and not be swayed. Looking for your intelligent, informed argument.”

This struck a nerve. After all, I’m a Dave Ramsey Financial Peace University graduate (2011) and prior instructor of the course. Yet I have 18 open credit cards and have generated over 2.6 million airline, hotel and bank points/miles from sign-up bonuses alone.

Before I virtually debate Dave Ramsey on credit cards, let me say this: I highly respect Dave Ramsey. His program has helped many people out of crippling debt. If you’re in debt, his simple and effective 7 Baby Steps and Debt Snowball are great plans of action for getting your finances under control. But, that doesn’t mean that I agree with him on everything. And credit cards is certainly one of those places where I disagree with him.

Dave’s Argument

Dave Ramsey doesn’t mince words when he talks about credit card debt:

  • “There’s no good reason at all to have a credit card”
  • “Responsible use of a credit card really doesn’t exist”
  • “When credit cards stay out of your wallet, money stays in!”
  • “There’s no positive side to credit card use. Even if you pay the bill on time, you’re not beating the system.”

And, he famously carries a large pair of scissors around to events to dramatically cut up credit cards.

Instead of credit cards, Dave Ramsey instructs followers to cash out their paychecks and “assign every dollar a name” by dividing these funds into different envelopes (groceries, restaurants, entertainment, gas, clothing) for spending. He’s not even a fan of using debit cards, arguing that “anytime you’re not using cold, hard cash with Uncle Benjamin looking up at you, you have a tendency to spend more.”

And he’s not a hypocrite when it comes to selling stuff on his website and at shows — Dave Ramsey’s organization doesn’t accept credit cards for any purchases (although it does accept debit cards).

credit cards in wallet

My Rebuttal

On credit cards, Dave Ramsey is both right and wrong. But I understand why. For his audience, Dave needs to take a black-and-white stance on each issue and stick to it. If you watch his videos or read his materials, there’s no room for debate. Either something is always right (term life insurance, paying cash) or always wrong (whole life insurance, using a credit card). There is no room for debate in Dave’s dogma.

It makes sense for him to take firm stances on all financial topics when you consider his followers come to him for advice on a topic they’re already overwhelmed about: finances. They come to him for simple do or don’ts. “Credit cards? Simple! Don’t.”

And, for Dave’s core audience, credit cards are the wrong choice for one big reason: they can’t control their spending. That’s why they’re in debt and in pain enough to seek out money advice from a crazy-sounding guy on the radio.

Indeed, spending with a credit card can lead to overspending vs. using cash — either due to availability of funds or ease of purchasing. Splurging every once in a while is fine if you can afford do to it, but Dave’s target audience is in debt and needs to pinch every penny. So, it makes sense for him to insist on a cash-only system.

But that doesn’t mean that credit cards are wrong for everyone, and that’s where I take exception. Dave doubles-down on his “no credit cards” mentality, making wild claims to dissuade anyone from considering using a credit card:

  • Point expiration: “Some points expire after 18 months, which is barely enough time to rack up a significant amount of rewards” and “A lot of cards offer points that expire after a couple years. It’s kind of like your boss taking back a Christmas bonus because you didn’t spend it fast enough.” He conveniently leaves out the fact that most points expire after 18-24 months of inactivity. That’s very different than if points and miles expired regardless of what you did.
  • Interest charges even when paying your balance: “Two-cycle billing is when the credit card company averages your balance over two months and charges you interest for both, even if you paid one of those month’s bills in full.” This is still listed on Dave’s website as the #2 reason not to get a credit card, even though the practice was banned by the CARD Act of 2009.
  • Losing all points for missing one payment: “The fine print will outline several ways your points could expire. Did you know you could lose all rewards if you miss one payment?” No, I didn’t. And in fact I’ve yet to run across a program that does this. He doesn’t provide any examples of ones that do.
  • Cash back: “This sneaky incentive sometimes comes in the form of statement credit—and not actual dollar bills.” Umm, ok… But, that statement credit will reduce the amount of “actual dollar bills” you need to make your payment in full.

As an overall fan of Dave’s, I’m disappointed in his claims, misleading comments and numerous straw man arguments made in an effort to dissuade anyone from using a credit card. But, again, I get the reasoning for trying to attack everything having to do with credit cards. After all, “Credit cards? Simple! Don’t.”

The truth is, there’s nuance that Dave doesn’t want to acknowledge. There’s responsible use of credit cards and irresponsible use of credit cards. If you’re going to use a credit card to overspend and go into debt in the pursuit of travel rewards, I’ll also take a very clear stance: don’t! Indeed, TPG‘s #1 commandment of travel rewards is “Thou shalt pay thy balance in full.”

However, if you’re able to responsibly manage your spending, there’s no reason for you not to utilize credit cards. After all, no debit cards that I know about offer primary rental car insurance. When paying with cash, you aren’t going to get the opportunity to apply for a difference in price when the item you just bought goes on sale, get a refund when your brand new Apple Watch breaks or replace your cell phone when it conveniently dies just outside the warranty. And a debit card definitely isn’t going to reimburse $1,000 worth of travel costs when a typhoon wrecks your travel plans.

On top of all of those protections credit cards can provide, you’ll accumulate credit rewards to earn cash back, free flights, free hotel stays, visit incredible lounges and/or earn a wide-range of travel rewards. Even business credit cards can rack up major point balances.

Dave Ramsey’s argument not to use credit cards is both right and wrong. He’s right that those that can’t control their spending absolutely shouldn’t get or use credit cards. However, his argument is wrong for those who pay their balance in full and utilize the rewards.

Featured photo by Anna Webber/Getty Images for SiriusXM.

Chase Sapphire Preferred® Card

WELCOME OFFER: 80,000 Points


CARD HIGHLIGHTS: 2X points on all travel and dining, points transferrable to over a dozen travel partners

*Bonus value is an estimated value calculated by TPG and not the card issuer. View our latest valuations here.

Apply Now
More Things to Know
  • Earn 80,000 bonus points after you spend $4,000 on purchases in the first 3 months from account opening. That's $1,000 when you redeem through Chase Ultimate Rewards®. Plus earn up to $50 in statement credits towards grocery store purchases within your first year of account opening.
  • Earn 2X points on dining including eligible delivery services, takeout and dining out and travel. Plus, earn 1 point per dollar spent on all other purchases.
  • Get 25% more value when you redeem for airfare, hotels, car rentals and cruises through Chase Ultimate Rewards®. For example, 80,000 points are worth $1,000 toward travel.
  • With Pay Yourself Back℠, your points are worth 25% more during the current offer when you redeem them for statement credits against existing purchases in select, rotating categories.
  • Get unlimited deliveries with a $0 delivery fee and reduced service fees on eligible orders over $12 for a minimum of one year with DashPass, DoorDash's subscription service. Activate by 12/31/21.
  • Count on Trip Cancellation/Interruption Insurance, Auto Rental Collision Damage Waiver, Lost Luggage Insurance and more.
  • Get up to $60 back on an eligible Peloton Digital or All-Access Membership through 12/31/2021, and get full access to their workout library through the Peloton app, including cardio, running, strength, yoga, and more. Take classes using a phone, tablet, or TV. No fitness equipment is required.
Regular APR
15.99%-22.99% Variable
Annual Fee
Balance Transfer Fee
Either $5 or 5% of the amount of each transfer, whichever is greater.
Recommended Credit

Editorial Disclaimer: Opinions expressed here are the author’s alone, not those of any bank, credit card issuer, airlines or hotel chain, and have not been reviewed, approved or otherwise endorsed by any of these entities.

Disclaimer: The responses below are not provided or commissioned by the bank advertiser. Responses have not been reviewed, approved or otherwise endorsed by the bank advertiser. It is not the bank advertiser’s responsibility to ensure all posts and/or questions are answered.