Let's talk about Dave Ramsey and why he doesn't like credit cards!

What's up you guys, it's Graham here. So, what are the comments I get a lot of on my channel, especially on my videos about getting a credit card and building your credit history?

Comments like, "Dave Ramsey would let me show you drunk yet!" He'd have a heart attack if he ever heard you tell people that get a credit card and build their credit history. To be honest with you, I mean, that’s how I was raised. I grew up believing that credit cards were evil and that only people that needed to borrow money ever used credit cards. Both my parents, growing up, were in terrible credit card debt, and that’s all I saw. But it wasn't until I got older that I realized that not having a credit card was a huge mistake that put me at a huge disadvantage.

Then, I realized credit cards are actually really great when you just use them responsibly, and you can use them to your advantage. So, this is something I really want to discuss: is Dave Ramsey's stance against credit cards right or wrong, or is there a good middle ground between the two?

Let’s talk about this. By the way, it’s so important with any of these things to try to get as many different perspectives as possible and see as many different opinions as possible. Then it’s up to you to come up with your own conclusion. I never recommend just following someone blindly just because they have a following or just because they have a status associated with their name. They have a certain level of wealth for money; I never recommend doing that.

It’s always important to be as objective as possible and ultimately come up with your own choice and your own opinion about what works best for you. So, if you guys don’t already know who Dave Ramsey is, he’s a financial speaker, and he also has a YouTube channel where he answers questions and takes calls from people who call in on money-related issues. I think he provides a pretty good foundation for anyone just getting into personal finance, maybe financial independence, and people that really want to get out of debt.

From what I've seen, he pretty much just focuses on the average person with the average income and with average spending habits. Let’s face it: the average person has terrible spending habits and is in terrible debt from overspending. Now, with that, he’s also extremely against credit cards, taking out loans, building credit, or anything that involves a credit card. He almost makes it come across as if credit cards are evil and should never be used in any circumstances by anybody.

It’s nice to say, but from what I’ve seen, the average person does not care about personal finance, saving money, and building their wealth. I think it’s also safe to say that most people are more concerned about getting an immediate raise in their job just so they can end up spending more money. The truth is, for most people, the immediate gratification of buying that brand new shiny car, getting that cool house, or that photo of that vacation is very hard to resist when you break it down to a very low monthly payment.

So, in that regard, Dave Ramsey comes in extremely strong to try to break that cycle that so many people get caught up in. For most people, like I said, the temptation is there with a credit card just to go and spend money unwillingly. They have no control over it because it’s more of an emotional decision than a financial or educated decision. It’s almost like Alcoholics Anonymous for credit cards.

For an alcoholic, there is no middle ground; there is no, "Oh, I’ll just have one drink." Usually, you have to go to an extreme to try to break that cycle, and that’s what Dave Ramsey is doing for people that just can’t control their spending. If you can’t control your spending, psychologically, the best thing you can do is cut it out entirely. You need to go to those extremes just to try to break that cycle and get over it.

This isn’t necessarily a rational choice; this is an emotional choice. When it comes to overspending, a lot of it is emotional; it’s not a logical or rational decision here; it’s all emotional. So, when you’re dealing with emotions, sometimes what’s rationally correct is not going to work. Sometimes you can’t reason yourself out of how you feel. So, in that case, you have to go extreme, and you have to cut off credit cards entirely if you can’t handle it.

And that’s the thing with emotions; it often overrides the correct thing to do. This is what Dave Ramsey is good at—he knows the psychology of his average viewer. For this, I honestly applaud him because his strategy of cutting cold turkey is probably the best possible outcome for his viewers who are strapped with debt and can’t control spending. This is the only way possible for these people to climb out of the debt.

If you asked me if I thought the average person could responsibly handle their money, I would say no. In that regard, Dave Ramsey is spot on. For the average person who has that spending problem and is riddled with debt, Dave Ramsey takes a great approach to it, and I totally agree with him. But for people that don’t have that problem, I think there are much better avenues to take than just saying credit cards are bad, never get a loan, and don’t get any debt.

Even with you watching this right now, chances are just because you're watching, you’re in the very small minority of the population that’s actually interested in saving money, investing long-term, and growing their wealth. I hate to say it, but that’s not true of most people. So, Dave Ramsey’s approach isn’t really the full picture because credit cards and building your credit are hugely important when used responsibly.

If you want to buy a house and invest in real estate, guess what? You need good credit. If you’ve got $50,000 cash in the bank and you want to go and buy a $30,000 car, guess what? It makes sense to go and take a loan out on that car where you’re paying 2% interest, but the money you have cash sitting in the bank can make you 10% somewhere else, thereby you profiting on the difference of that, making you an extra 8%.

You can’t do that if you pay cash for something. You want a business loan to expand your products? Well, guess what? You also need good credit. You want to lease a car? Good credit! At a certain point, when done correctly, the money you borrow is borrowed at a lower interest rate than what your money can actually make you if invested elsewhere, and you can profit on the difference.

That’s really where the beauty of leverage comes in. For me, building my credit has been the foundation of almost everything I do. I wouldn’t be able to invest in real estate if it wasn’t for having a good credit score. I wouldn’t even be able to have rents and have real estate make sense numbers-wise if it wasn’t for the power of leveraging your money.

As I mentioned at the beginning of the video, one of the biggest mistakes I’ve made so far was not getting a credit card when I was much younger. I waited until I was over 21 years old until I got my first credit card, and by then, it was a little bit late. I had already bought my properties; I had to pay for them in cash instead of getting a loan. I would have been able to double my cash flow in those first few years if I just got a loan, and I didn’t, because I couldn’t qualify. I was raised thinking credit cards were bad.

Credit cards are also an immediate layer of protection between you and your money. So, unlike a debit card, when you go and charge something and it’s immediately deducted from your account, on a credit card, it’s not immediately deducted from your account. So, if your number gets stolen, if someone charges something without your permission, no money is out of your account.

With a credit card, if it gets stolen, you can cancel the card, and they send you a new one in a few days; it’s super easy. You can also get cash back, points, and purchase protection with a lot of the rewards that credit card companies offer. The thing is, it needs to be used responsibly. Just like any other financial tool, yes, it could be abused.

So when you're dealing with credit, just be responsible about it. Don’t go and buy that television just because you have the available credit and the $100 a month that’s going to cost you isn’t that much, because it adds up. You pay a ton of interest. If you can’t control your spending, at least know yourself to know that maybe you shouldn’t have a high limit on the credit card. Maybe it’s better for you not to get the credit card.

If getting the credit card is the difference between you buying all these things because you can’t help yourself or doing it responsibly, just be able to know yourself and then pick which option is right for you. For the people that can responsibly handle a credit card and control themselves, getting a credit card and building up a credit history could be one of the best things that you do.

At the end of the day, it’s just important to know yourself. If you’re going to be one of those people who’s going to abuse it, who’s going to overspend, don’t do it and listen to Dave Ramsey. But if you know you can’t handle it, then don’t listen to Dave Ramsey and instead work to improve your credit history as much as you can.

Ultimately, when it comes to anyone on the internet who’s sharing their opinion and giving their advice and what they would do, take everything with a grain of salt. Listen to as many different people as possible, get as many different perspectives as possible, do your own research, and figure out what’s best for you and come to your own conclusion.

Do not follow anyone blindly, even me. Anything I say, still do your own research on it and figure out what works best for you. Plus, I just believe that learning to make your own decisions and come to your own conclusions is really what’s going to take you the farthest in life.

So, as always, you guys, thank you so much for watching. I really appreciate it, and I hope you guys enjoy this. If you haven’t already, make sure to click subscribe and smash that notification bell so you know when I upload a video. Don’t miss out on anything! So, subscribe and notification bell!

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