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  • Writer's pictureNick Heil

Why Dave Ramsey Is Wrong About Not Using Credit Cards

I'm a huge Dave Ramsey fan. He was one of the early influencers that contributed to my passion for personal finance and investing in general.

He gives a ton of great advice and has done more for the average individual's financial situation than I could possibly imagine.

He will most certainly go down as one of the world's most influential financial minds and rightfully so. I would never hesitate to tell someone to follow his principles. I truly believe that if you follow all of his principles, you would do pretty well in life.

Why Dave Ramsey is wrong about credit cards

With that being said, I don't agree with all of the advice he gives, and that's okay.

I feel once you attain a certain amount of financial grounding you have really outgrown a lot of Dave's principles. Personal finance can be just as much of an art as anything else, meaning no one certain path is the best path to take.

As many of you know, Dave Ramsey is very against using credit cards. He doesn't think anyone should use them and I'm sure everyone reading this blog is familiar with his on show antics of having debt stompers cut up their credit cards with a giant pair of scissors.

That's great and if you go your whole life without using credit cards then good for you, that is truly awesome!

However, credit cards when used in the proper manner can be a great tool to help you build further wealth and solidify your finances. Let me be brutally honest, though.

If you do not pay your credit cards off every single month and in full, then you have no business having a credit card or employing any of the below strategies.

For the longest time, I avoided using credit cards. Even with all of my advanced financial training and know-how I just stayed away from them. Maybe that's Dave Ramsey living inside my head.

I really started to use credit cards to my advantage in 2017. At this point in my life, I prefer cash back credit cards. To me, cash is king. I prefer this method over travel points because it allows me to directly reduce my credit card balance, and therefor the cost of my purchases, or it allows me to invest the cash back into the stock market.

If there is a certain amount of spending you must incur each year anyhow, why not earn something back for all of that spending? Rewards credit cards are a great way to do just that.

When researching cards, you will want to be careful though and make sure they don't charge any annual fees. A lot of good ones don't, but it's still important to double check.

There are some fantastic travel rewards credit cards out there. In fact, there is a lot of evidence that the travel rewards benefits have a significantly higher value than the cash back rewards.

You should head over to to learn more about travel rewards credit cards. Those guys are truly experts in that field and built their blog based on travel rewards cards.

Traveling is just not my major priority at this particular moment in my life. I'm in acquisition mode looking to build businesses and forms of passive income.

Over time, however, my use of travel rewards credit cards will significantly increase, but for right now I'm going to go with cash back.

I use a few cards right now. One is the Amazon Rewards Visa Signature credit card.

It gives you 5% back on all Amazon purchases if you are a Prime member and another 2% or 1% depending on what category the rest of your spending falls into. In addition, the card gives you 5% off on all purchases at a Whole Foods Market.

There are a lot of benefits packed into using the Amazon card. For one, there are the obvious benefits of receiving free 2-day shipping and reduced prices as a prime member. Then you stack an additional 5% off on all Amazon purchases on top of that and it makes shopping with Amazon a no brainer.

Just imagine if you could cut 5% off the top of anything you purchase, anywhere. It's pretty easy to see how those savings would really add up over time. So, as you can imagine I'm a big Amazon shopper.

One of the negatives of my Amazon card is that they gave me a relatively low limit compared to what I think my financial situation justifies. You can always ask for a credit increase over time, though. Also, my use of other cash back credit cards negates my need to have a high credit limit.

Another great card I use is the Capital One Savor card. I get cash back on every purchase no matter what and they started me off with a $10,000 limit.

Again, let me reiterate that the limit is not necessarily that important, especially if you pay your card every single month and if you aren't doing that then you shouldn't have a card.

It is nice to have a card with a high limit, though, for those larger purchases in your life. My fiancé and I just purchased our wedding bands and it was nice to throw them all on one cash back credit card so we earned a good amount of money for the purchase.

On this particular purchase alone I was able to earn $30 back. That doesn't seem like much, but it starts adding up on every single purchase.

Let's go through a simple example. It is not a wild idea to anticipate a small family spend in excess of $30,000 per year on general life transactions. In fact, this is probably quite conservative.

If that family put all of those purchases on a credit card with an average cash back benefit of 1.5% then they could save $450 per year just because they put it on a card and paid it off quickly.

If that same family invested those cash back card benefits back into the stock market at a long term rate of return of 10% then that simple investment would grow to over $260,000 someday.

All because they simply decided to make their purchases on a cash back credit card and pay it off in full every single month.

If you paid in cash for all of that spending, you would not only not get those benefits, but you would probably lose several hundred dollars in loose change over the course of a year, too!

That's what I call using the system to your advantage. It also highlights the importance of the compound effect. If you haven't read The Compound Effect by Darren Hardy, I highly recommend it.

His book goes into how the compound effect is everywhere in our lives, not just our money. Your decision not to go to the gym today has a compounding effect.

Your decision to be unhappy today has a compounding effect. Your decision to read this blog and enhance your financial knowledge has a compounding effect.

The fact of the matter is there are small advantages like this all around us, we just need to train ourselves to see the opportunities and take advantage of them. When we do, those advantages compound into huge advantages someday down the road.

Again, Dave Ramsey gives a lot of good practical advice and he shouldn't be ignored. However, sometimes it literally pays to think creatively and take advantage of opportunities put right in front of you. Credit can be used intelligently and it can save you a lot of money!

Credit card companies offer these sweet benefits because they know on average people will carry credit card balances and they will collect huge interest charges.

In fact, so many people do it that it's still profitable for them to offer these fat bonuses to smart spenders who pay off their card every month in full. Don't be a sucker!

What are some creative ways you are saving money or making more money? Share them below in the comments and please share this article on social media to get a conversation started!



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