If you’re familiar with Dave Ramsey’s financial principles, you know he is absolutely, 100% against using credit cards AT ALL! This is great advice for the majority of Americans, as many have found out the hard way credit cards can easily get you into deep financial trouble.
Just to be clear, the “Dave Ramsey credit cards rule” is this: never, ever use credit cards. In fact, if you already have them, even if you’re paying them in full, cut them up, pay them off, and close the account forever.
Obviously, following this rule is a simple way of never letting credit cards get you into trouble. But it does leave many wondering if it’s the right rule for everyone. Can some people use credit cards responsibly and even benefit from them?
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Dave Ramsey’s Perspective on Credit Cards
Let’s first begin with the principles Dave Ramsey stands on when it comes to credit cards.
Does Dave Ramsey recommend credit cards?
If you call his radio show and ask him if he recommends credit cards, get ready for an earful. (Well, occasionally he can be super kind to a caller who is just ignorant about his teachings in managing money. But…if that caller pushes back against his argument, then you may be surprised by a different side of Dave!)
He absolutely tells callers to stay as far away from credit cards as possible. There’s nothing good about “playing with snakes,” as he says. You’re going to get bitten.
If you can’t get a credit card, how does Dave Ramsey say to build credit?
The simple answer? You don’t. According to Dave, you can get through life just fine with a zero credit score.
Wait…a zero credit score? How will you get approved for anything?
How can a person live comfortably without having a credit score?
Well, ideally, if you have a zero credit score, you’re saving up cash and purchasing the item outright anyway. There’s no need to borrow money if you have the money to pay up front. 
Yep, that includes paying cash for cars and all other large purchases, possibly even a home.
But since most people don’t want to wait years or decades to purchase a home, Dave Ramsey does give advice on being approved for a mortgage with a zero credit score. It absolutely CAN be done with a manual underwriting process. Now, not every mortgage lender will do it. But you can find the one(s) that will and use them.
This does bring up the question on trying to rent a car, rent an apartment, and even upgrade things like your cell phone or wireless plan. Having no credit score can make things a tad more complicated in these situations. The rental car companies will take your debit card, but most likely then put a “hold” on some cash in your account. Trying to rent an apartment and upgrade your cell phone or wireless plan may require a large deposit.
So while there are workarounds for not having a credit score, it usually takes planning ahead as well as more effort on your part in order to get around it.
Is it good to have no credit card debt?
So, all in all, Dave Ramsey believes that your financial life is much safer with no credit card debt. And it makes sense. Credit cards make you believe you have plenty of money to spend, when in reality, it’s not your money you spent (until you have to pay it back). They make it so easy to spend more money than you have on hand to spend—a LOT more. So they trick most people (all people?) into spending beyond their means to begin with.
If you have no credit card debt, you’ll never pay interest. You’ll never have to deal with a credit card debt collector. Your spending is less likely to get out of hand. Oh, and you have less bills to pay each month, meaning you can free up more time and money in your life!
Reasons You Should Adhere to the Dave Ramsey Credit Cards Rule (Hint: That means don’t use them at all!)
If any of the below apply to you, you should certainly stay away from credit cards.
- They have gotten you in trouble before — no matter how much better you’ve gotten at managing your money, you’ll most likely be much better off without credit cards than bringing that temptation back into your life
- You’ve ever paid interest or a late fee — just save yourself the hassle of worrying about it, pay it off completely, cut the card up, and close the account. Life will be simpler and much more stress-free with one less bill to worry about!
- If you’re telling yourself, “I can’t pay for it now, but I’ll be able to pay the card off next month.” Or “I’ll be able to pay off this purchase before the interest rate increases.” Nope. Don’t even play that game. No matter how determined you are, most likely that will not turn out the way you planned.
- You are prone to impulse purchases and overspending. Do you stick to your list when you go to the grocery store? Or do you see a few things along the way (especially at the overpriced checkout area!) that you just have to put in your shopping cart as “extras”? Do you see a product online that you never have thought about before, then all of a sudden it becomes a must-have? One immediate click and it is already being shipped to you? If things like this are a frequent thought process for you, just say “no” to those credit cards.
- If you don’t have the money now, but plan to use the next paycheck, or next bonus, or tax refund, or whatever it is to pay the balance on the credit card, you are, in fact, playing with snakes. That future money may or may not be available when you think it will be. Instead, try to figure out a way to avoid the debt using these common sense and Biblical principles.
Reasons you may be able to use credit cards responsibly, and even wisely
But what if you can use your credit card and actually spend no more money than you would with a debit card or cash? There seems to be a small percentage of people that can do this.
With the right money mindset and within certain guidelines, there does seem to be an argument for people using credit cards and benefiting from their rewards programs. Bob Lotich of seedtime.com shares some advantages of why he uses credit cards instead of debit cards. He also gives the disclaimer that you have to pay them off each month and you have to know yourself well enough to know that you’re not spending anymore than you would if you were paying cash. That 2nd one is a BIG DEAL so give it some major consideration!
Is it possible using a rewards credit card could be considered wise stewardship of your money?
I honestly can’t figure out why anyone would want to use a credit card at all unless there was some reward benefit attached to it. Why pay an extra bill if there’ no extra benefit to it? Just use the debit card.
But a benefit that many credit cards have over debit cards are the “substantial” rewards. Many credit cards now give cash back, travel points, gift cards, and probably other rewards I’m not aware of.
Obviously, the more you spend, the more rewards you receive. And, again, here we realize how important it is to be sure you’re not tempted by this to spend more than you already carefully budgeted out.
Many budgeting programs out there now can help credit card spending seem more like you’re spending with cash. For example, if you use YNAB (You Need a Budget), when you spend with a credit card, that money is taken out of your budget category just as if you spent with cash. (There will be a day or two delay for the transaction to clear your bank first.) If you are one who pays very close attention to your money this way, especially if you input pending transactions before they clear the bank, it’s possible you can use credit cards wisely.
In this case, you can reap the rewards by “earning” free travel or cash back (or another benefit) by just spending within your budget anyway!
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How do you know if you’re using a credit card wisely and benefiting from it?
Clearly, the credit card companies are out to make money, so if you think you can beat their game, you better be 100% confident in that!
Here are some ideas to think about as you decide:
- Do you have the self-control and self-discipline in order to use your credit card to spend as if it were cash? This is hard for the majority of people. Remember, credit cards give the illusion that you have more money to spend than you do. Just swipe and go! If a credit card tempts you in anyway to spend more money than you know you would if you were paying cash, just say “no!”
- You must be diligent to pay the balance in full, as well as on time, each month. This way no interest and no late fees are charged. When contrasted with using cash or a debit card, this is an extra bill to pay, makes things a little more time-consuming and complicated, and gives you more opportunity to mess up! Is it worth it?
Another thing you can consider is doing a combination of cash envelopes and using a credit card. Example: If you pay for childcare each month, you are going to pay the same amount whether you use cash or a credit card. But the credit card gives you rewards. So you could technically earn extra money each month just by paying with a credit card instead of cash. And with that example, of course you won’t spend more than you already planned.
What does the Bible say about Christians using credit cards?
Obviously, credit cards were not an issue in Biblical times. But borrowing money, owing people, and paying them back was definitely a thing.
Though the Bible doesn’t say using debt is strictly prohibited, it does talk about many negative consequences of borrowing money.
Proverbs 22:7 says “the borrower is slave to the lender.”
Romans 13:8 says to “let no debt remain outstanding.”
If you do choose to use credit cards for rewards benefits, it does beg the question, “Am I slave to the lender?” If you have the cash money in your bank account at the time of the charge, and you are able to pay the credit card in full each month, are you really slave to them?
Just as strongly as Dave Ramsey recommends against credit cards, others’ opinions are that they are absolutely not a slave to the credit card. In fact, they feel as though the credit card company may actually be a slave to them because they are reaping the rewards and paying nothing extra for so-called “free” money.
Another interesting thing to note is that by gaining rewards on credit cards, and by doing it wisely and responsibly, you could actually be giving more money away for the benefit of God’s kingdom!
If you tithe on your income, shouldn’t rewards count for income as well? What if you tithe on your credit card rewards?
***Want to know more about what Scripture says about money? Take the 5 Day Email Challenge to manage money God’s way, and allow Him to transform your financial situation!***
And, if you want to read more about this topic, check out Money, Possessions, and Eternity by Randy Alcorn. And, for an alternative to Dave Ramsey’s baby steps, check out the Crown Money Map by Howard Dayton.
Now, let’s face it: Dave Ramsey’s baby steps work!
Most likely you found Dave Ramsey because you’re in debt, and you want to know how to quit being a slave to that debt. When you follow those baby steps, you pay off all your consumer debt in Baby Step 2. And, if you’re following that plan 100%, then you also cut your credit cards up and close the account once they’re paid off.
Dave’s baby steps have helped millions of people become debt free and be well on their way to financial freedom! That alone should motivate you to take his advice.
So, to be clear, the safest way to stay out of trouble with credit cards is to stay away from them. That’s just basic, simple common sense.
Cash envelopes will most likely save you the most money overall because when you spend, you physically see the money leaving, and there is definitely a finite amount. Spending with a debit card could be a more convenient option compared to cash, but still, swiping a card, period, can cause you to spend more than if you used cash only. Then, on an even higher level, credit cards don’t cut you off like debit cards will when you spend more money than you actually have in the bank to cover it.
Cash envelopes, hands down, will beat credit cards any day. And, honestly, I believe they will beat debit cards as well. Spending with cash sets a clear boundary for spending, aiding in discipline more than a plastic card (whether credit or debit) ever will.
Given all the above points, is the “Dave Ramsey credit cards rule” for you?
Are you one of the very small percentage of the population who believes you can use credit cards and their rewards programs wisely?
Clearly, the rewards on credit cards will not make you rich, and you must evaluate whether you can use them wisely or not. But it is possible that you can “earn” a little extra money on what you’re already spending (as long as you can trust yourself to spend within your budget as though you were using cash — with NO exceptions!)
Or should you play it safe, keep it simple, and stick to cash (and maybe use a debit card here and there)?
What do you think? Should there be exceptions to Dave’s rule?
I’d love to hear your thoughts! And, as always, continue to steward your money — and your life — intentionally!
Heather
