Why Dave Ramsey Ideas on Credit Are Crazy

Josh RodriguezBy: Josh Rodriguez

April 28, 2014April 28, 2014

Dave Ramsey

Have you heard of Dave Ramsey? Of course you have. He’s a well known personal finance expert with a following that I could only dream of. However, I’d also like to point out that the man is absolutely crazy. OK, so maybe I’m being a little harsh, but I think it’s justified. So, today is going to be the start of a series all about Dave Ramsey. However, I’m not going to praise him as the credit God his followers do, instead, I’m going to tell you the truth. I’m going to explain why his advice just doesn’t work most of the time. Today, I’m going to start with one of his main principles.

Credit Cards Are Horrible!!! Well, Not Really Dave!

In just about everything he does, Dave makes some kind of mention that you should avoid having credit card accounts at all costs. Sorry Dave, but I’ve got beef with that statement. Why? Because you’re wrong and I don’t agree with you at all!

Dave Ramsey’s Crazy Approach Can Cause More Harm than Good

You know, there is one thing I can say that’s good about Ramsey. That is that even though most of what he does proves that he’s completely out of his mind, it can work for a small group of people. That group is the group that is so severely struggling financially that they really shouldn’t have credit cards or build anymore loans and debt. So, now we get to why his approach is fundamentally broken. Dave Ramsey generalizes personal finance. Because people are unique, naturally, their finances will be as well. So, giving a very general approach to a broad audience really is a horrible thing to do.

On Modest Money, when we give advice, we tell you the exact group of people that advice is aimed toward. Why? Because we know that one plan couldn’t possibly be the perfect plan for everyone out there. However, under Dave Ramsey’s twisted point of view, everyone should follow one plan no matter how unique your needs may be.

Let’s Talk A Little About Why His Views on Credit Cards In General Are Twisted

Dave Ramsey gives you the impression that no matter how good you are with your money, you should avoid credit cards at all costs. That is absolutely nuts and here’s why…

Credit Cards Are An Important Tool For Building Credit Scores – No matter who you are, when you go to buy a car or buy a house, you’ll learn that your credit score is one of the most important 3 digit numbers you’ll ever come across. The reality is credit cards, more importantly; secured credit cards are an amazing tool when it comes to establishing or repairing credit scores. So, if you’re trying to improve your credit, don’t listen to Dave, a credit card will most likely be worth a gem to you and your goals.

Credit Cards Provide A Form Of Financial Security – No matter how much money you’ve got in the bank, at some point in time, you may come across hard times financially. Although, it’s not wise to rack up debts you can’t pay back, it is wise to have a credit card that acts as an emergency fund. That way, when it rains, you’ve got a rain coat!

Credit Cards Help Build Businesses – Businesses like import/export companies rely heavily on credit. Without credit, many of them wouldn’t have the capital to import; therefore they’d have no product to export. Many businesses work on credit as capital. Without credit cards, these businesses wouldn’t exist. Who knows, one day a credit card may help you build your own company!

Purchase Protection – Even if you’ve got the cash for online purchases, service purchases, or even large purchases, it’s usually best to use your credit card. Why? Credit cards come with purchase protection. If you use your checking account you have a better chance of losing your money should something go wrong. However, you can always dispute a purchase on a credit card!

Credit Cards Offer Rewards – There are tons of people, including me, who use credit cards to earn rewards. We charge up, pay off the balance before we’re charged interest, and make out like bandits. I earn free airfare, cash back, and more just by using my card. If you’re capable of maintaining debts, there’s no reason you shouldn’t be earning rewards too.

Final Thoughts

Credit cards are good for some people and bad for others. The reality is, there is no one financial plan that will fit everyone out there. That is the basis by which I stand and which leads me to say that Dave Ramsey is a nut job if he really thinks he’s helping everyone that buys into his plans! What are your thoughts and comments about Dave Ramsey’s philosophy?

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Josh Rodriguez

About the Author:

Joshua Rodriguez is the owner and founder of CNA Finance. His experience in market analysis is vast, earning him positions as a contributor to top websites like Equities.com, Benzinga, and several others. When he's not working, Josh enjoys time with his wife, 3 year old daughter, 8 year old son, and five large-breed dogs who tend to keep his schedule booked. To get in touch with Joshua, contact him on Twitter or email him at CNAFinanceHelp@gmail.com.

28 thoughts on “Why Dave Ramsey Ideas on Credit Are Crazy”

  1. Wise use of debt is an oxymoron: if you were wise you’d be earning interest, not paying it. Credit Cards do n’t work out for the majority of people who use them or the companies would go out if business!

    And am I surprised to see Credit Card ads running at the top of your page? No, I’m not!

    1. Such platitudes are meaningless. You may as well go on to call credit cards evil.
      My retirement account rose 33% last year (2013) vs the 2.5% my mortgage cost me, as I watched it value erode by a 1.5% inflation rate. Is it wise to pay interest at 18%? No, of course not. It’s rarely wise to even pay a dime in credit card interest. But lumping all debt together as if an 18% card and 3% mortgage are equally to be avoided is nonsense.

  2. I’m proud to have followed Dave Ramsey’s plan and paid off 56k in 26 months in 2011. Life without credit cards is much much easier.

    I don’t need credit as I don’t borrow money

    When I goto buy a car I write a check and can finish the transaction in minutes after a deal is made.

    For financial security I have 6 months expenses in cash for emergencies

    The import/export example for businesses using credit cards to borrow for inventory is just bizarre. No company that lasts will buy their inventory on credit cards with interest rates of 9-23%. You just killed your margin.

    Debit cards offer the same protection as credit cards. They just won’t put you in debt.

    Dave Ramsey is not wrong on this. By not using debt in the last 4 years I’ve went from a -70k net worth to 100k net worth. My income has increased by 25% over that time, I’ve paid cash for exotic vacations, and I’ve been able to give like I’ve never imagined.

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