Posted on 03/28/2012 7:20:25 AM PDT by Kaslin
Dear Dave,
I want to keep one of our credit cards open and use the bill-pay option for utilities and other monthly bills. I want to do this so we can continue earning rewards points, and the way I look at it, we’d just be re-routing the money and paying it off every month. My husband doesn’t like this idea and thinks we should get rid of them all. Am I just asking for trouble by wanting to keep the rewards card open?
Cheryl
Dear Cheryl,
Yes, you are. Life never works out exactly the way you think it will. You can make all the well-reasoned and best-intentioned plans you want, but sooner or later that snake is going to bite you.
The only thing I’d consider in a situation like this is a debit card that has a rewards system attached. Lots of debit card programs offer the same kinds of rewards programs offered by credit card companies, with one big exception—you don’t have to go into debt!
You need to stop chasing these stupid brownie points, Cheryl. According to Consumer Reports, 78 percent of credit card airline miles are never redeemed. Studies also show that people spend more when using credit cards as opposed to cash. That extra money you spend on things you don’t need is money you could have been saving and investing. So, where’s the reward?
Cut up the card and close the account, Cheryl. You don’t build wealth by using credit cards!
—Dave
Dear Dave,
My wife and I are both active duty Marines. She’s planning to get out in a few months, but I’m staying in for the long haul. You recommend saving 15 percent for retirement, but how does that apply in my case when I’ll be getting a good pension after 20 years?
James
Dear James,
I’d like to see you do both. Just imagine the money you guys would have for retirement with your military pension and a big pile of cash from having saved 15 percent of your income over the years.
Having options is a great thing. Think about all the things you could do down the road if you save for retirement and have your pension in place. You could pay cash for a home, or even open a business when you retire from the military. And these are things you probably wouldn’t be able to do working with just your service pension.
You’ve got a great future if you’ll just keep plugging along and saving, James. Let the military do its thing, and you guys keep pumping 15 percent of your income into Roth IRAs and other pre-tax retirement plans. It’s going to be pretty cool!
— Dave
I don’t agree with this. My brother charges everything he buys on a 2% Amex card, about $40K a year, and gets back $800 every year in cash
My expenses are much lower, but I still charge about $8K a year. I got a free TV this way.
If you have sufficient cash reserves and self-discipline, it is foolish not to do this. I only charge $500-1500 a month, and keep at least $10K in my checking account at all times.
Dave says that 75 percent of airline miles go unused. It is hard to use airline miles. You need a minimum of 25K or more for one ticket, usually much more. What good is one ticket? At one dollar per mile, you have to charge about 2000 per month to 'earn' one ticket per year. Miles expire, plus most airline credit cards have annual fees. Solution: get cash or merchant money that you know you will spend, (like Costco dollars).
Agreed. I've been using cash reward credit cards for 20+ years. Pay them off every month, no cost whatsoever.
Credit cards also have safety and security advantages over debit cards. For example, when someone steals your credit card information—as happened to me twice on two different cards last year (I never let a card out of my sight anymore)—chances are the card issuer will detect and prevent fraudulent charges from going through. (Given your $50 liability limit, it's in their best interest.) BUT, if someone steals your debit card info, you're probably on your own. Good luck with that.
I’m not sure how the credit cards can make any money at all, or can manage to stay in business. Everytime I see Ramsey discussed, everyone pays their balances every month in full.
heh
I’m not sure how the credit cards can make any money at all, or can manage to stay in business. Everytime I see Ramsey discussed, everyone pays their balances every month in full.
heh
“Dave’s not here, man.”
If your debit card has the Visa logo on it, that is just not true.
ALL my normal day to day transactions are paid for with my Paypal Debit card. I get 1.5% Cash Back on every purchase. ( I am grandfathered in on that rate now I believe you can only get 1% cash back on new accounts) That adds up because it is put right back into my account so then I get 1.5% again when I use the cash back money.
I don't keep large sums in the Paypal account. But I am always transferring cash over to replenish it. Seems dumb to me NOT to take a 1.5% discount on every purchase I make.
Seriously? Transaction fees.
But, when our beloved Nanny State Congress gets around to dictating what size of fee is "fair" ...
“I don’t agree with this.”
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
I also don’t agree. But if someone is so financially ignorant that they have to ask Dear Dave fundamental and basic questions like these, then yes... the best answer is to cut up your credit cards.
Most people, howerver, have (or should have) sense enough to know how to manage money.
Spot on. But too many people have neither sufficient cash reserves nor self-discipline.
Personally, I use this rewards debit card which offers a minimum of 1% back on everything you buy. That's as good as or better than most credit cards.
Dave Ramsey’s great (for people who are financially retarded).
I don’t agree with Dave, either. I use credit cards that give us cash back, prefer the cash to the miles and we’ve gotten quite a bit of cash back from Discover and Chase. Yes, I do pay off the balances every month.
No most people do NOT have that snese is why Dave advises against it. If you have the good sense to do so, it is your choice to make. My father also charges everything to a crdit card and pays it off each month.
I, on the other hand, having failed in the past, do not. I have no credit cards, nor a desire to have one. Been down that road and am never going back. I now have no debt and paln to keep it that way.
Its about risk...
if you wanna risk the stumble use a credit card.
if you don’t wanna risk don’t use the credit card.
Being in debt has little to nothing to do with a credit card.
I don’t have a credit card, yet I am in debt. Having said this, I’ll admit my debt to income ratio is less than 30 percent and my home will be mortgage free in 8 months, and I’m only 53.
In other words - contrary to what Dave Ramsey preaches - being in debt is no great sin.
There’s very little risk if you have large savings and no debt. If you’ve been living way below your income for decades, there’s no way you’re going on a spending spree.
Yah... I run all of my expenditures through my Mastercard, and I pay it off every couple of weeks. I’m totally debt free.
Well, I am 50 and I have no credit card debt, no mortgage, and no car note. Sorry to say, I have rarely met anyone who pays off their credit card debt each month. Most let it ride and then add more. Been down that road myself once.
If a person can handle their debt, then it is no problem for them, but most who call Dave Ramsey have screwed up and need to be told that “you can’t spend your way out of debt”. Something the democrat party and obama don’t seem to understand either.
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