DO NOT cut up your credit cards!

MacFrisco

Diamond Member
#1
I see that Dave Ramsey's books are on the bookshelf at Barnes and Noble again.
Ramsey is credit illiterate.

This guy is making a fortune telling people some good things about getting out of debt, but his idea's on Credit are out dated by 50 years. The worst advice is to cut up those credit cards and use ATM cards. DON'T DO IT!!!

Your credit score (FICO) is used in Car Insurance, Home Insurance, Life Insurance, job background checks, and of course anything you purchase on credit like a car or refinancing your home. Some say you can pay as much as $600 a year extra in car insurance premiums with poor credit. Ask your agent.

Also not having access to quick credit, can hurt in emergencies, or if you want to make a large purchase where the store is offering great deals like 0% interest where a payment overtime with no interest actual saves you money as the dollar decreases in value.

Why not cut up credit cards? Your FICO score is about how well you use credit. How much money people are offering you and how much you are using, debt to available credit ratio. It is also how responsible you are with credit. Think about it, why would a bank want to loan money to a person who has no credit and no one is offering them any credit? You will pay higher rates.

Cutting up your credit cards, hurts your FICO score because you are decreasing your available credit. Its really that simple. Plus you are not keeping a current credit history showing how well you manage credit and that hurts your score as well. Cutting up credit cards hurts your credit score!

Dave Ramsey also says to used your ATM card for traveling... DON'T DO IT.
True your bank account in protected against fraudulent charges, but if you have to go 30 days with no money in the bank until the fraud can be resolved AND you have no credit cards you could be in trouble in a hurry.

On the other hand if someone gets your credit card information, your bank money is still safe.
I'm seeing signs at Hotel Desks that say that using an ATM card is not advisable, as first you have to be approved for a percentage over your stay, locking up money in your bank account that you are not going to use. Then your ATM card number is out there to be stolen. Some Hotels are refusing ATM Cards as well.

Again think about it from the banks point of view. If you have 5 or 6 credit cards with $10,000 in available credit in each card and your using less than 10% of that $50,000 or more, and you want a loan, banks will fight to give you money. If you have no credit cards, your FICO score is low and you will pay extra for a loan because the banks aren't that interested in people who cannot show a good credit history.

ONE MORE REASON.
Last summer my wife an I drove across the country it took 5 days, with 5 hotel says. We didn't pay a thing for the Hotels we used points, credits or rewards. That was over $$800 in Hotel fees FREE!!!

I got my last iPad with points ... Free!

Use your credit cards like cash. Pay off the balances each month. Wait for 0% offers to make big purchases make the monthly payment to pay off the loan one month early.
The banks love people who can use credit wisely, and it can save you a lot of money in the long run.
Learn how to use the banks money. They actually want you to!!

A friend of mine started his business with Credit Cards (not advisable), but there was a business for sale he knew the owner and got it for steal. He refurbished the place with credit cards, and sold it for profit in 6 months.

People who tell you to cut up credit cards, don't know anything about credit. And credit scores are becoming more important in lots of ways besides just getting a loan.

Why You Shouldn't Use a Debit Card When Paying for a Hotel or Rental Car
 

bsanders

Senior Member
#2
how would the credit bureau know if you cut up your credit cards? Most people who find Ramsey are really deep in the hole due to credit cards. Some people just aren't responsible enough to use credit.
 

Tooleman

Diamond Member
#3
Dave Ramsey is amazing.. for years iv been an idiot and said Dave Ramsey is STUPID, turns out it was me who was STUPID..

I'm finally on the bandwagon.. Wish I was years ago..

I'll admit it.. I was STUPID and wrong.. At the very least there is hope for me..

Ask any rich person if they got rich from credit card points.. lol..
 
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#4
There are benefits to using credit cards if you are very very disciplined but most people probably just need to cut them up and remove that temptation. I know I do. I'm not sure credit card companies should be able to hand out credit cards to college students like they did when I was in college.

Going to see Dave Ramsey helped motivate us to pay off all our debt and quit being stupid...and that was years ago so we are in pretty good shape now. I paid off the highest interest rate debt first but I understand why Dave Ramsey uses the debt snowball. You don't really need to buy Dave Ramsey's expensive kits though in my opinion.
 

planomateo

Platinum Member
#5
All his stuff is common sense and he gave us a good perspective on some things.

We modified his debt snowball to fit our needs. I'd recommend it to anyone.

Agree with the OP on getting rid of credit cards will have an impact to your credit score, stupid but it is what it is.

We had a card that we had a very high limit on years ago, we called and asked them to lower our credit limit down by $20k and it did impact our credit score (due to our credit to debt ratio).
 
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#7
So what Mac, did you get a bonus for posting outside of politics?

.
Still paid by the word though I see. :D

On topic -- Ramsey offers good advice for the people who need help getting out of debt. People who are used to putting everything on a credit card, don't budget, are up to their eyeballs in debt, and don't understand what they are doing wrong or how to fix it, need a simple, easy to understand, workable solution for fixing their trouble. Ramsey offers that. It's not the only solution, but it works.
 

Tooleman

Diamond Member
#9
T wheeler, that is not all he offers.. he tells people how to live without debt to build wealth.. other then a mortgage he says pay with cash..
 

Chris1771

Silver Member
#11
Mac's post is spot on. I have 3-4 credit cards and make sure to use all of them every few months or they will be closed for non-use (yes this happens). I put 99% of everything I purchase on my rewards card, which gives me 2% cash back, which auto-funds my daughters 529 every month, just for paying for things I would buy anyway. I pay off my credit cards in full every month to avoid interest charges. There really is no magic behind it.

Ramsey can help people who are completely clueless on how to manage their spending - it can help a lot of folks. But it's important to have and use credit, even if it's just a little bit at a time.
 

Chris1771

Silver Member
#14
Ok explain to me why having credit is good, other then mortgage..
Mortgage, Car loan (or any sort of loan), Home insurance rates, car insurance rates, life insurance rates, fraud/identity theft protection using credit vs debit/cash, and some employers use credit checks as part of the background check/hiring process.

There is no downside of using credit cards unless you are incapable of managing a budget and can't control your spending.
 

Tooleman

Diamond Member
#15
You can get a mortgage without a credit score.. Auto loans are stupid, you should pay cash..

Insurance rates lol.. Full coverage on an auto you have a loan on is a hell of a lot more then liability on your cash car..

Dont keep a lot of cash in your checking account, dont link it to savings..

And if you get a credit background check for a job, they are not looking for no debt, they are looking for huge amounts of debt..

But credit cards sound harmless, we all think we will take advantage of the points.. Then crap happens, and we let it slide a month, and again till crap..

Ask any millionaire if they got rich with credit card points.. Or taking out auto loans, or writing off mortgage interest..
 

TXJohn1117

Double Platinum
#16
I use credit cards for nearly all my purchases, mostly AMEX but sometimes Visa for those merchants who don't accept AMEX. I always pay them off at the end of the month. I've never let one slide. My credit score is over 800.
 

Chris1771

Silver Member
#18
You can get a mortgage without a credit score.. Auto loans are stupid, you should pay cash..

Insurance rates lol.. Full coverage on an auto you have a loan on is a hell of a lot more then liability on your cash car..

Dont keep a lot of cash in your checking account, dont link it to savings..

And if you get a credit background check for a job, they are not looking for no debt, they are looking for huge amounts of debt..

But credit cards sound harmless, we all think we will take advantage of the points.. Then crap happens, and we let it slide a month, and again till crap..

Ask any millionaire if they got rich with credit card points.. Or taking out auto loans, or writing off mortgage interest..
No one claimed credit cards make you rich. If I am going to spend $5k per month for things that are within my budget, I put it on my rewards card, make $100 cashback towards my daughters 529, and pay off my credit card when it is due. That's $1200 per year for doing essentially nothing. But go ahead and use debit cards or cash if it works for you. I like free money.