Interesting viewpoint on credit cards

[RetireAge50]

"Dave Ramsey says that you can withdraw 8% per year from your portfolio in retirement based on a 12% rate of return and 4% inflation."

Might work using a more aggressive portfolio and a variable spending approach.

Helps to have 55 million as a buffer for the ups and downs.

 

[purplesky]

My debit card pays me 4% on my balance up to 10k if I use it 20 times a month. I use it for very small purchases and use the cash back card for everything else.

So your debit card requires 20 transactions per month to get cash back on purchases. 4% is a good deal so it sounds worth it.

I think my credit union offers a similar type debit card that requires certain usage to get cash back.

So I wonder if Dave Ramsey is against using debit cards that force customers to spend more money to qualify for cash back.

Im not even sure if I could come up with 20 transactions per month using a debit card.

 

[hopefullyoneday]

So your debit card requires 20 transactions per month to get cash back on purchases. 4% is a good deal so it sounds worth it.

I think my credit union offers a similar type debit card that requires certain usage to get cash back.

So I wonder if Dave Ramsey is against using debit cards that force customers to spend more money to qualify for cash back.

Im not even sure if I could come up with 20 transactions per month using a debit card.

I get 4% on my account balance not my purchase. 20 transaction are easy for me as I am still working and have daily expenses.

 

[bclover]

Exactly! When people say things like: If you have to lay down $100 bills at the grocery store .....

I ask: Who's "you"? Not me, that's for sure. And on a practical note, if you start flinging Benjamin's at a supermarket they might call the police.

Lol. See that's me. I don't say ouch whenI use cash. I go to the grocery store with a list. I may pick up a few extra things if the sale is good but if I use my credit card its not like all of a sudden I walking out with an extra 200 bucks of food.
Im not a big fan of TV guru's and I definitely hate his investment advice

 

[davismills]

I've listened to Dave Ramsey many times and I think he gives sound advice to his target audience. That is not me nor this ER audience.

Listening to his call in fans will help you understand why he uses these tactics. His audience, for the most part, has had no personal financial education during their formative years. They are in "emergency" mode and for them, I believe DR's techniques do work.

Since I don't own a debit card, I exclusively use two credit cards for almost every purchase. They are paid off in full every month and I use the credit card statements as my form of DR's "envelope" system.

If I used cash exclusively, I would be depriving myself of many economical purchases/opportunities that reside online. I believe this technique provides me better financial "throughput".

 

[Pilot2013]

But CCs are definitely a trap and thats the catch. Been there done that. Never again!

You are pretty militant about your disgust for Dave Ramsey, yet apparently at one time you needed to heed at least some of his advice.

As many have said on here, this audience, for the most part, is not his audience. But them again I think this audience is a rather small one. There are a LOT more people out there that can get benefit from listening to what Dave Ramsey says, even if it may not be the best or most sophisticated financial planning advice. But for HIS audience, if he can get them to stop the cycle of debt, and start making some plans for their future, well, more power to him.

 

[Pilot2013]

This is from Nerd Wallet for 2017:

"Americans’ total credit card debt continues to climb in 2017, reaching an estimated $905 billion — a nearly 8% increase from the previous year — according to a NerdWallet analysis. [1]

And the average household that’s carrying credit card debt has a balance of $15,654. Households with any kind of debt owe $131,431 (including mortgages), on average, the data analysis found."

I would say the larger audience could benefit from Dave Ramsey's plan.

 

[Nemo2]

Since I don't own a debit card, I exclusively use two credit cards for almost every purchase. They are paid off in full every month

DW & I didn't think we had one....turns out our TD bank card has that facility.....(not that we've ever, or would ever, use it as such...just can't see the benefit).

(Not being a TV watcher I'd never heard of Dave Ramsey.....kinda thought he was a cook...but, different guy, different spelling...never seen the other one either.)

 

[Danmar]

If I used cash for everything, my wallet would be way too thick. Would probably throw my back out. Seems like a pretty impractical idea for dubious benefit. Besides I wouldn’t get all those airline points.

Obviously there are many people who might benefit from not having CC’s. But surely not on this site.

 

[athena53]

There are a LOT more people out there that can get benefit from listening to what Dave Ramsey says, even if it may not be the best or most sophisticated financial planning advice. But for HIS audience, if he can get them to stop the cycle of debt, and start making some plans for their future, well, more power to him.

I agree- he's helped a lot of people. In one of his books, he told of a couple who REALLY wanted to meet with him ASAP because they were in a big financial mess and wanted his help. He suggested a date the following week, but they couldn't make it- were leaving on a cruise.

For that audience, keeping them away from credit cards is a very good idea. Using Nerdwallet's average of $15,654 balance for households carrying a balance, even at 18% that's $200/month in interest alone.

I can ignore his advice about credit cards- haven't paid a dime of finance charges in decades, and $200/month is about what I receive in cash-back rebates. I'm also not enthusiastic about generating income through real estate investment, even though it's worked very well for some people. I still think Ramsey has some good points.

 

[hopefullyoneday]

I agree- he's helped a lot of people. In one of his books, he told of a couple who REALLY wanted to meet with him ASAP because they were in a big financial mess and wanted his help. He suggested a date the following week, but they couldn't make it- were leaving on a cruise.

For that audience, keeping them away from credit cards is a very good idea. Using Nerdwallet's average of $15,654 balance for households carrying a balance, even at 18% that's $200/month in interest alone.

I can ignore his advice about credit cards- haven't paid a dime of finance charges in decades, and $200/month is about what I receive in cash-back rebates. I'm also not enthusiastic about generating income through real estate investment, even though it's worked very well for some people. I still think Ramsey has some good points.

Just because the average credit card balance is 15k does not mean that they pay interest. I have over 12k total on 2 cards and pay no interest or fees until promo ends then i just get another cc and do a balance transfer.

What are your monthly expenses where you can generated $200 a month in cc cash back. I get 4% back each month on a 10k account which only comes out to about 35 a month.

 

[USGrant1962]

Just because the average credit card balance is 15k does not mean that they pay interest. I have over 12k total on 2 cards and pay no interest or fees until promo ends then i just get another cc and do a balance transfer.

What are your monthly expenses where you can generated $200 a month in cc cash back. I get 4% back each month on a 10k account which only comes out to about 35 a month.

Good point - we run an average of say $5K/month through our CCs and pay it off every month.

[Edit] I now see that Athena53 said "carrying a balance" so maybe its apples and oranges. In that case $15K seems very high. My CC-challenged relatives run $5-10K carried balance, I think, and they are exactly the people Ramsey is addressing.

 

[Chuckanut]

Ramsey holds that if you have to lay down $100 bills at the grocery store your brain says "Ouch!" and that will make you spend less.

$100 bills?!?!?!?!

To quote Thurston Howell the III - "How quaint. I didn't know they made them that small"

 

[Danmar]

Good point - we run an average of say $5K/month through our CCs and pay it off every month.

[Edit] I now see that Athena53 said "carrying a balance" so maybe its apples and oranges. .

We run a fair bit through our CC’s every month (ranges maybe between $20-$50k). I believe we would be included in the average outstanding CC figures even though we pay them totally off every month? We realize about $15-25k in business/first air tickets per year. Never even heard of this Ramsey guy?

 

[Pilot2013]

Never even heard of this Ramsey guy?

And you probably wouldn't, as you probably never look up get out of debt tags on the internet, or things of that nature.

Again, he doesn't serve the FIRE or wealthy audience.

 

[Danmar]

And you probably wouldn't, as you probably never look up get out of debt tags on the internet, or things of that nature.

Again, he doesn't serve the FIRE or wealthy audience.

Yes, that was my point.

 

[hopefullyoneday]

Just curious but how and on what do you spend 5k to 50k for per month on a CC. Do ou guys own businesses.

 

[athena53]

What are your monthly expenses where you can generated $200 a month in cc cash back. I get 4% back each month on a 10k account which only comes out to about 35 a month.

Oops- can I plead "frozen brain"? It's cold here today! I got about $1,200 back last year so that's $100/month on a 2% cash back Fidelity Visa. This was an unusual year; I spent about $27,000 on travel and nearly $10,000 on work on the house. The travel was an outlier; DH died late in 2016 and we cancelled a planned trip to Iceland and got most of our $$ back, so that went towards 2017 travel. In 2017 I took a cruise in Central America and also went to Iceland, and then paid about $10K towards travel this year. Yes, travel is a major priority in my retirement!

 

[Sue J]

DH and I have no problems with income vs spending.

All of our married years DH preferred to be disconnected from our money. It's just not his thing. Discussion about finances/taxes/savings made him uncomfortable and itchy. He preferred to be uninformed and trusted me to handle everything, which I did and I enjoyed it.

When he retired in 2010 I wanted him to be involved (or at least AWARE) of our money. I was having a good time using cash back credit cards for the rewards, always paying in full every month and keeping track just fine. He found that very confusing and complicated. For him using credit cards disconnected him from the transaction.

When he took over the grocery shopping after he retired, he asked if he could just use cash for any spending we do locally. If that keeps him connected to our money I am fine with it. We still use a credit card, debit card or PayPal for online purchases. For groceries, Walmart, Home Depot, anything bought in a store in person, we use cash.

Part of me misses the fun of chasing CC rewards but if it keeps him in touch with our money I can adjust.

 

[NYEXPAT]

How do you use cc's that are in other people's names and not get arrested? (maybe I shouldn't ask?)

It is all perfectly legit. People open an account at their bank and get issued a CC. They then ask for a second card on the account with my name on it. They pay all charges on the account ( get the rewards points) I reimburse them in cash. The downside is I am stuck with their credit limits (whereas mine would be much higher).

 

[Danmar]

Just curious but how and on what do you spend 5k to 50k for per month on a CC. Do ou guys own businesses.

Nope. Retired and living the good life.

 

[brett]

We seldom use cash any more. Our trips to the ATM are few and far between. Perhaps once a month.

We don't use our debit cards either.

Everything possible goes on our credit cards. We like our credit card reward programs.

We pay with cash more often when travelling. But only if there is an added charge for using a credit card, if none is accepted, or if a discount for cash is offered in lieu of using our credit card (more common in Europe).

We have never paid credit card interest.

Guidelines for using credit cards are very much dependent on the person who happens to be using the card. I know several relatives who use credit cards when they really should be sticking to cash only for their own financial well being. Based upon the increasing consumer debt load there does not appear to be a stampede towards the cash only method.

 

[hopefullyoneday]

Oops- can I plead "frozen brain"? It's cold here today! I got about $1,200 back last year so that's $100/month on a 2% cash back Fidelity Visa. This was an unusual year; I spent about $27,000 on travel and nearly $10,000 on work on the house. The travel was an outlier; DH died late in 2016 and we cancelled a planned trip to Iceland and got most of our $$ back, so that went towards 2017 travel. In 2017 I took a cruise in Central America and also went to Iceland, and then paid about $10K towards travel this year. Yes, travel is a major priority in my retirement!

Oh ok gotcha, sorry for your loss. I hope one day to travel that much.

 

[Hamlet]

I’m getting close to the point where I don’t use cash very often. Even fast food places take credit cards, and most of them now have systems where paying cash actually ends up being slower.

Heck, even the vending machines at work now take credit cards.

It’s gotten to the point that I’m only using cash for person-to-person stuff like Craigslist, rummage sales, comic conventions, and poker.

I carry a chunk of cash, but I generally don’t spend it day-to-day anymore.

 

[purplesky]

You are pretty militant about your disgust for Dave Ramsey, yet apparently at one time you needed to heed at least some of his advice.

As many have said on here, this audience, for the most part, is not his audience. But them again I think this audience is a rather small one. There are a LOT more people out there that can get benefit from listening to what Dave Ramsey says, even if it may not be the best or most sophisticated financial planning advice. But for HIS audience, if he can get them to stop the cycle of debt, and start making some plans for their future, well, more power to him.

No I didn't need Dave Ramsey to get out of credit card debt. I just played the 0%balance transfer game and 0% deferred financing game on stuff from guitar center and Best Buy, etc and it just got old.


Dave Ramsey has the 2nd or 3rd largest radio show in north America so you are wrong about his audience size. His audience size is HUGE!

Yes if people go through Financial Peace university and follow the baby steps they can get out of debt provided they have enough income.

Its life after completing Dave Ramseys financial peace university where things get really weird.

So Dave Ramsey teaches people to close all credit card accounts and that they should completely ignore their FICO score and allow their FICO score to get to zero. Really? That is terrible advice.

If you follow Dave Ramseys baby steps you will have a fully funded 6 month emergency fund so at that point a person should be able to handle the Costco or Amazon or fidelity CC without issue and be greatly rewarded.
But no! Dave Ramsey apparently 25 years ago had American Express yell at his wife Sharon because they were behind on payments.

So 25 years later he still rips on American Express and will not give them any business and tells millions of people daily on his radio show that credit card companies are evil. Really? The banks are the devil.

Dave Ramsey is a financial entertainer who trolls his audience daily by being bitter about people who criticize his make it up as you go advice .