I take issue with the claims that "There is no good reason to have a credit card," and more specifically that "responsible use of a credit card really doesn’t exist." And yeah, I get it: this advice isn’t for me. This advice is for people who are already in debt. And for those people, it's probably not bad advice. I’d be totally fine if he would say to them “responsible use is possible, but you won’t be ready to try it for a long time.” But he doesn’t do that, so I’m compelled to write this rant. Ramsey tells us "responsible use" doesn't exist. An extraordinary claim that Ramsey declines to even try to present evidence for, being content to point out lots of ways credit cards could hurt people when misused and leave it at that.
[Alright, it actually doesn’t look like this article was written by Ramsey himself, but I’m still taking it as representative of his views, it’s on his site and linked to by many other posts.]
Early on, the article anticipates the objection "I can pay my credit card off each month. So what’s the big deal?" and counters with “There is no positive side to credit card use. Even by paying the bill on time, you’re not beating the system.” And then goes into talking about how much credit card debt the average family carries and something about “you’re likely to pay thousands of dollars in interest over the years as you carry a balance.” What does this have to do with the person saying they can pay off their card each month? This bit is a total non-sequitur. The next sentence returns to the possibility of paying the card in full, and we’re informed that with one missed payment “your interest rate skyrockets, you get slapped with fees and it dings your credit.” Come on. Interest rate doesn’t matter if you never carry a balance, and Ramsey and Co. don’t believe credit scores matter (says so later in this article.) So that just leaves fees, but electric bills and rent also have fees for late/missed payments. Adults need to learn to pay bills reliably. This isn’t an argument against anything.
The next bit about cash-back cards is less an argument, than a shitty attempt at a gotcha. It’s basically: “You think you’re getting this money back, but what about the fees you’re paying? Bet you never thought of that ever!” And if you don’t pay annual fees, this means basically nothing. Look, I don’t doubt there are people in this situation, not realizing they’re getting ripped off… but this isn’t an argument against credit cards, it’s an argument for doing some really freaking simple math before getting one that has a fee. As for rewards in the form of miles, I avoid them myself because it’s less immediately obvious how much what I’m getting back is worth. And I’m afraid travel-specific rewards would incentivize me to take more trips than I should, rather than cash-back which goes into my regular money pool. However! I’m not assuming every person using them is enough of a dullard to not know what they’re getting. Once again, the writer demonstrates that misuse exists (or rather, that misuse is possible) and believes that supports the claim that responsible use doesn’t exist.
I’ll admit, the bit about credit cards making you spend more is a little fuzzier. Personally, I can demonstrate that I’m paying nothing in interest or fees. I can’t conclusively prove that I’m not spending more than I would with cash or debit only. But I will say the bolded admonition that “You will spend more if you use credit cards.” is without support. The evidence that this is even a trend on average is IMO somewhat questionable, but the evidence that this is in effect for every person without fail is non-existent. The article confidently assets that “When you pay cash, you can feel the money leaving your hand,” and that “Flipping a credit card up on a counter does nothing to you emotionally,” which is an extreme oversimplification of the issue. And if it were true that simple, then immediately recommending debit in place of credit makes no sense. Wouldn’t flipping a debit card on the counter also do nothing to me emotionally?
Anyway, thanks for reading. Again, I know this advice isn’t for me, but I still believe it could do good for more people if Ramsey learned some nuance and stopped mixing crappy logic and baseless assertions in with the legitimate stuff.
Submitted October 25, 2017 at 09:24PM by titaniumelemental http://ift.tt/2zGgEuG
