Credit Cards

[evangelist6589]

I have noticed that Dave Ramsey has a very different view on this topic when compared to Crown Financial, Randy Alcorn, and John MacArthur. I know that Grace Community, nor Paul Washer recommend Dave Ramsey for financial assistance as I did ask Grace about him once, and they did not agree with him. Washer recommends Randy Alcorn.

http://www.heartcrymissionary.com/reading-list

Ramsey is very charismatic, a excellent communicator, and has some good things to say. However I think he goes on the extreme, can be unbiblical in his endorsement of all the self-help authors that he does on his show. So I do not fully agree with him, but what I do agree on is the following regarding Credit Cards.

-They can be very dangerous as a snake or fire.
-If one cannot payoff a credit card each month, then one should not have one.
-One must only use a Credit Card for budgeted purchases
-Cash Back Rewards and Sky-Miles can be a strong advantage to a card as well as the fraud protection that many of them offer over debit cards.

For some reason I have been hit with fraud twice in Colorado in a year (not once in SC in 6 years) and each time the bank closed my card and I had to wait 5-7 days to get a new one. But the one time I got hit with CC Fraud I would not be responsible for charges, and a new card would be shipped to me in 1-2 days FREE of charge.

I know each has his or her own conviction on this one and one should obey it as mentioned in Romans 14. Randy Alcorn in his book managing God's Money says on pages 182ff that he himself uses a credit card but only for budgeted purchases and only if one can pay off his or her entire balance. Likewise Crown Financial says something similar in their book on finances, so if one has this conviction be careful and use it wisely and only for budgeted purchases. If you however think that a Credit Card is a toy to go buy new entertainment, new iPhones, and other toys not budgeted then you have made a mistake.

 

[InTheLight]

-They can be very dangerous as a snake or fire.
-If one cannot payoff a credit card each month, then one should not have one.
-One must only use a Credit Card for budgeted purchases
-Cash Back Rewards and Sky-Miles can be a strong advantage to a card as well as the fraud protection that many of them offer over debit cards.

This is Dave Ramsey's advice? Zero for four, at least from my perspective.

 

[Salty]

This is Dave Ramsey's advice? Zero for four, at least from my perspective.

Make that at least the perspective from 2 folks

salty

Actually its zero for 5
I don't care for his attitude

 

[Don]

This is Dave Ramsey's advice? Zero for four, at least from my perspective.

For someone such as yourself and Salty, agreed.

For someone who was never taught about financial management, and/or has no financial self-discipline, it's a method of introducing that self-discipline.

As with other things - works for some, but not all.

 

[preachinjesus]

Couple of things to keep in mind for Dave's Financial Peace course (which we use as our financial counseling course at the church where I serve):

1. It is "shock-therapy" for people who need it
2. Dave's approach is to, ultimately, get people to live debt-free
3. The biggest issue with many folks in financial need is not that they have no money, its that they are managing it wrongly

That said, I respectfully disagree with much of what Dave teaches about credit cards. My wife and I have several credit cards that we use and we have some sensible rules about them. These include: never carrying a balance, paying off every month even if it hurts, only using zero percent cards that will paid off at least 6-8 month before the grace period ends, and never paying an annual fee.

One of our cards, our primary credit card, gives us significant reward dollars for our purchases. In fact, and I just cashed our rewards in, we just paid for a car repair that was nearly one thousand dollars with this year's cash back. If you manage your cards well they can be a tool. However, if you cannot you should never, never use them.

I like Dave and have zero problems recommending him to our church.

 

[thisnumbersdisconnected]

This is Dave Ramsey's advice? Zero for four, at least from my perspective.

Make that at least the perspective from 2 folks

Let's take them one at a time.

1. They can be very dangerous as a snake or fire.
If that isn't true, there is no truth. Credit cards in irresponsible or undiciplined hands are what has driven personal indebtedness to ridiculous and dangerous heights. If a person is not aware that signature credit is a recipe for disaster if it is not used judiciously, they will almost certainly overextend themselves, max out their credit cards, and be in a position of holding unsecured debt they can't pay off in 30 years.

2. If one cannot payoff a credit card each month, then one should not have one.
Again, this is absolutely true. However, it also doesn't preclude the use of a credit card for an emergency expenditure, providing you are able to healthily take on the added debt and pay it off in three to six months. That means paying more than the monthly minimum. In fact, paying the monthly minimum is what prevents most people from begin able to pay off their cards in 30 years. The minimum barely covers the interest and pays almost nothing toward the principle.

3. One must only use a Credit Card for budgeted purchases.
Why would you do otherwise? If you are willing to understand the logic of budgeting a car loan or home mortgage payment, why in the world would you not budget your credit card payment? In fact, we have one card. We buy everything with it. We get huge reward points on every purchase, and we get to cover the big expenses in our vacations using those points. We haven't paid for a hotel, flight, or rental car in over a year, because of those points. Which brings me to the next item.

4. Cash Back Rewards and Sky-Miles can be a strong advantage to a card as well as the fraud protection that many of them offer over debit cards.
Like I said ...

I don't care for his attitude

It could use some improvement, to be sure. Who among us can say that isn't true of us, too?

 

[Salty]

Let's take them one at a time.

1. They can be very dangerous as a snake or fire.

Can they - of course - and they can be very useful.
Fire can be dangerous - and very useful

2. If one cannot payoff a credit card each month, then one should not have one.
.... However, it also doesn't preclude the use of a credit card for an emergency expenditure, providing you are able to healthily take on the added debt and pay it off in three to six months. .

You just contradict what Davy said.

3. One must only use a Credit Card for budgeted purchases.
Why would you do otherwise? ?

Suppose you find something at 50% off - so you purchase on your credit card - even with interest - you have saved money.

Generally # 3 is a good rule - but not written in stone.

4. Cash Back Rewards and Sky-Miles can be a strong advantage to a card as well as the fraud protection that many of them offer over debit cards.
Like I said ... It could use some improvement, to be sure. Who among us can say that isn't true of us, too?

I don't fly - its against my religion


And as far as Davys attitude - he needs to check it the door especially as a leader.
*************

Saltys rule # 1
I actually spend less money with a credit card than if I am carrying cash.
(I know - I'm in that 1%)

 

[Don]

As for Dave's attitude: Let us not forget that, like Rush, Sean, and so many others, Dave is an "entertainment" entity first, in order to get listeners and stay on the radio.

 

[Revmitchell]

Couple of things to keep in mind for Dave's Financial Peace course (which we use as our financial counseling course at the church where I serve):

1. It is "shock-therapy" for people who need it
2. Dave's approach is to, ultimately, get people to live debt-free
3. The biggest issue with many folks in financial need is not that they have no money, its that they are managing it wrongly

That said, I respectfully disagree with much of what Dave teaches about credit cards. My wife and I have several credit cards that we use and we have some sensible rules about them. These include: never carrying a balance, paying off every month even if it hurts, only using zero percent cards that will paid off at least 6-8 month before the grace period ends, and never paying an annual fee.

One of our cards, our primary credit card, gives us significant reward dollars for our purchases. In fact, and I just cashed our rewards in, we just paid for a car repair that was nearly one thousand dollars with this year's cash back. If you manage your cards well they can be a tool. However, if you cannot you should never, never use them.

I like Dave and have zero problems recommending him to our church.

A very sensible view of Dave Ramsey

 

[thisnumbersdisconnected]

Can they - of course - and they can be very useful. Fire can be dangerous - and very useful

Ramsey didn't say they couldn't be useful, did he?

You just contradict what Davy said.

No I did not. And if you explore what Ramsey says about such emergency expenses, he says the same thing I did.

Suppose you find something at 50% off - so you purchase on your credit card - even with interest - you have saved money.

If you pay it off in a month or even a few, yes. But the question is, do you need it bad enough to risk your financial reputation to put it on credit?

Fifty percent off sounds great -- but not if you don't really need it, or can save up for it at regular price. In fact, if you're saving up for it in advance, you'll probably be close to having the purchase price when it goes on sale. And if it went on sale once, it will go on sale again.

If you're not saving up for it already, you don't really need it.

I don't fly - its against my religion

I see ... :laugh:

And as far as Davys attitude - he needs to check it the door especially as a leader.

Agreed.

Saltys rule # 1
I actually spend less money with a credit card than if I am carrying cash. (I know - I'm in that 1%)

You and Michael Moore. :laugh:

 

[InTheLight]

Let's take them one at a time.

1. They can be very dangerous as a snake or fire.
If that isn't true, there is no truth. Credit cards in irresponsible or undiciplined hands are what has driven personal indebtedness to ridiculous and dangerous heights. If a person is not aware that signature credit is a recipe for disaster if it is not used judiciously, they will almost certainly overextend themselves, max out their credit cards, and be in a position of holding unsecured debt they can't pay off in 30 years.

A fire and a snake is an immediate, life threatening situation. A credit card balance is not an immediate, life threatening situation. Furthermore, unsecured credit is exactly that--unsecured. The credit card company can make your life miserable by calling you daily for collecting money but they can't come and repossess anything. Now, what would you rather deal with--a harassing phone call or having your house on fire? Ramsey's analogy fails on many levels.

2. If one cannot payoff a credit card each month, then one should not have one.
Again, this is absolutely true. However, it also doesn't preclude the use of a credit card for an emergency expenditure, providing you are able to healthily take on the added debt and pay it off in three to six months. That means paying more than the monthly minimum. In fact, paying the monthly minimum is what prevents most people from begin able to pay off their cards in 30 years. The minimum barely covers the interest and pays almost nothing toward the principle.

If one can pay off a bank card every month, they don't need a credit card.

3. One must only use a Credit Card for budgeted purchases.
Why would you do otherwise?

Emergencies. Travel. Online purchases, especially sale items.

4. Cash Back Rewards and Sky-Miles can be a strong advantage to a card as well as the fraud protection that many of them offer over debit cards.

Well, you can't buy an airline ticket without a credit card, and if you travel a lot it makes sense to get a card with miles rewards. From what I've seen of cash back reward cards the 1% or 2% incentive is not enough IMO. Unless you think getting $5-$6 back per month is a legitimate reason to have a credit card.

 

[Revmitchell]

It is a bad idea using cc for emergencies. That is why Ramsey promotes having an emergency fund.

 

[InTheLight]

It is a bad idea using cc for emergencies. That is why Ramsey promotes having an emergency fund.

Yes, I'm sure he does. Most financial counselors do. They typically say you should set aside 3 months salary for emergencies.

Now excuse me while I get pedantic, I know you love it when I do.

An emergency fund is a savings account that people call an emergency fund. That's all it is. Ya got a savings account with at least 3 months salary in it? There's your emergency fund.

If you've got a savings account with 3 months salary in it, you DON'T NEED a credit card. If you don't have a saving account with at least 3 months salary in it, you would need a credit card for emergencies.

 

[thisnumbersdisconnected]

If one can pay off a bank card every month, they don't need a credit card.

Unless, of course -- as I said earlier -- the card has a bonus program that gives you flights, hotels, rentals and other stuff that you normally would consider luxury or frivolous items, but won't if they can be covered with your rewards points.

Emergencies. Travel. Online purchases, especially sale items.

Again, if you need it, you'll save for it. If you aren't willing to save for it, you don't need it. Emergencies and travel connected to them are a different story. Everyone should have a credit card for such eventualities, but those that can't afford ridiculous interest rates -- which all credit cards have -- need to avoid using them for everyday items.

Well, you can't buy an airline ticket without a credit card ...

From an airline, you're right. From a travel agent? That's a different story. They take checks and cash.

... and if you travel a lot it makes sense to get a card with miles rewards.

Which is what I said, too.

From what I've seen of cash back reward cards the 1% or 2% incentive is not enough IMO. Unless you think getting $5-$6 back per month is a legitimate reason to have a credit card.

We get five points per dollar, but the points don't convert exactly to dollars. Nonetheless, we use our card for everything we buy except utilities and other debt payments. Then we pay it off completely at the end of the month. In one year, we collect enough points to pay for a two-week vacation with hotel, car and airfare covered by the points we've accumulated. We've occasionally had emergencies where we needed to carry more debt than we could pay off in a month, but we've paid off the extra the following month to avoid high interest charges.

If one is trying to finance his "wannas" on a credit card, it's a really bad idea. I'm going to trade my six-year-old truck in on a new F-150 next year. I'm going to use the proceeds from three houses that close around the first of the year to do so. I'll sell my current truck because I can get more from it through a direct buyer than any dealer will give me. I'll pay cash for the new truck. We'll do the same with my wife's two-year-old car in another cou9ple years. We don't believe in debt. It ain't healthy.

Obvious I have to carry debt on construction loans to build houses, but we're incorporated for that. The liability doesn't come back to us if the housing market crashes -- (and did you see what it did last month? Scary.)

That's my lecture on debt and credit cards. Obviously anyone is free to do as he wishes. We just don't like debt, but we like free stuff.

 

[InTheLight]

We get five points per dollar, but the points don't convert exactly to dollars. Nonetheless, we use our card for everything we buy except utilities and other debt payments. Then we pay it off completely at the end of the month. In one year, we collect enough points to pay for a two-week vacation with hotel, car and airfare covered by the points we've accumulated.

I'll have to look into this. What card does this?

We've occasionally had emergencies where we needed to carry more debt than we could pay off in a month, but we've paid off the extra the following month to avoid high interest charges.

That's the way to do it.

Obvious I have to carry debt on construction loans to build houses, but we're incorporated for that.

I use cash adv*nces against my credit card to finance my business when I have low cash flow months. I have an outstanding credit rating. I will get access checks that I can use like cash against my credit limit with terms like 0 percent interest until Aug 2015, (or similar). I know I'll pay off the balance before August 2015, so I use the credit card to finance cash flow in my business. No paperwork, no banker demanding financial statements, no equipment or receivables pledged as collateral, etc. It's a great solution FOR ME. I'm NOT advocating that others do this because it's usually very stupid. :laugh:

I've done this with offers like 2.99% until balance is paid off. I'm not going to get an unsecured loan at the bank for 2.99% with no payoff date!

I recently got an offer to apply for a new card that had 0% on any balance transfer until that balance was paid off. Yes, I was tempted to apply for it, take cash out on one of my other cards, then transfer it to the new card. An open ended zero interest loan, but I didn't need the money.

Oh, one more thing. You will LOVE your new F-150. Are you getting the twin turbo engine?

[BTW, cash ad vances was another verboten phrase on the board.]

And why is this thread not in Money Talk$?

 

[evangelist6589]

It is a bad idea using cc for emergencies. That is why Ramsey promotes having an emergency fund.

I would agree here unless you were in my boat back in 2011 when my engine blew and my emergency fund did not have enough to repair or get a used car and I had to take on a loan.

Ramsey people told me to take a bus to work. But no busses went to my job. Then they said to let this one female that had the hots for me and was married and separated drive me to and from work and everywhere and yes she did want that but I chose to take on debt to maintain my testimony and free from adultery.

 

[OldRegular]

Ramsey is correct!

 

[thisnumbersdisconnected]

I'll have to look into this. What card does this?

Bank of America MasterCard. Probably a BofA Visa, too, but I understand Visa is dropping BofA because it is bringing back the BankAmericard, which is what Visa was called when BofA owned it.

I use cash adv*nces against my credit card to finance my business when I have low cash flow months. I have an outstanding credit rating. I will get access checks that I can use like cash against my credit limit with terms like 0 percent interest until Aug 2015, (or similar). I know I'll pay off the balance before August 2015, so I use the credit card to finance cash flow in my business. No paperwork, no banker demanding financial statements, no equipment or receivables pledged as collateral, etc. It's a great solution FOR ME. I'm NOT advocating that others do this because it's usually very stupid. :laugh:

I've done this with offers like 2.99% until balance is paid off. I'm not going to get an unsecured loan at the bank for 2.99% with no payoff date!

Don't you have to pay a service fee for a cash ad-vance, though? We do. Unless you're ad-vancing yourself thousands, or tens of thousands, that service fee is too expensive, at least from my experience. Maybe I want to know where you're getting that deal. LOL

Oh, one more thing. You will LOVE your new F-150. Are you getting the twin turbo engine?

Yes, probably. I've owned F-150s all the way back to 1984. I've never regretted buying any of them.

[BTW, cash ad vances was another verboten phrase on the board.]

Isn't that interesting? I'm about to find out if that was fluke, or an actual filter.

EDIT NOTE: It's an actual filter, as the edits making the word acceptable will testify.

And why is this thread not in Money Talk$?

Another good question.

 

[InTheLight]

Don't you have to pay a service fee for a cash ad-vance, though? We do. Unless you're ad-vancing yourself thousands, or tens of thousands, that service fee is too expensive, at least from my experience.

There is a fee, they gotta get something out of you. It's been either 1.5% or 2%, and yes I'm getting thousands of dollars. Of course they are hoping I will still have a balance when the 0% promotional rate expires, but I make sure I pay it off.

Yes, probably. I've owned F-150s all the way back to 1984. I've never regretted buying any of them.

I've leased them for my business since 1996. Three year leases. Right now I've got a 2012 with the V8. They were just coming out with the turbo models and were swinging deals on the V8's so I opted for it instead of the turbo. I always look at Chevy's but GM is real proud of them ($$$$) so I go back to Ford. I was never a truck guy but I need it for business and Ford makes a great truck.