While I admit I don’t share Dave Ramsay’s conservative social views and sometimes I find his perspectives on why people are struggling financially to be tone-deaf, the man truly does have some absolute gems of ideas when it comes to dealing with your personal finances. In fact, I credit this man with empowering me to take control of my money, by giving me some much needed financial education about how to save and spend.
If you don’t already know, Dave Ramsay is the personal finance guru who got famous in the 80s and 90s telling Fox News “Boomers” how to pay off their debt, increase their wealth, and live debt-free. One of Ramsay’s main tenets is to pay off your debt and not use credit cards, arguing that a person should save for something they want, rather than use a credit card.
And while I do agree that we should save for purchases, rather than give into what Ramsay describes as our immature, “gimme gimme” toddler selves, I think Dave Ramsay is wrong about credit cards.
Here’s the reasons I’m ignoring Dave Ramsay’s advice and keeping my credit cards in 2021.
1. You cannot always rent a hotel with a debit card
I know that it was possible in decades prior to walk into a hotel, hand over some cash for the deposit and room rental, and never have to pull out any sort of plastic currency, but friends, those days have come and gone.
This is why I think it is absolutely smart to keep a credit card for use at hotels/motels, as I have never stayed anywhere in the U.S. where a hotel/motel allowed me to check in with just a debit card. Even if the debit card has a credit card symbol on it, like a Visa or MasterCard, it is still just a debit card, and the hotel employees know this.
Since every single hotel I have ever stayed in since 2010, in Europe and the U.S., has required I have an actual credit card, not debit card, when I check into the room, I will be keeping my credit card for this use.
2. You cannot always rent a car with a debit card
Just like the hotel/motel while traveling, you cannot always rent a car using just your debit card, even if it has the Visa or MasterCard symbol.
Now, of course every rental car company will have their own rules, but most places that I have rented from in the U.S. have required an actual credit card, not debit, for the deposit. This rule has especially applied to local renters, which means that when I had to put my car in a shop for repairs in my local area, the local car rental company told me that locals had to provide a credit card and only tourists could be exempt!
The deposit for a rental car is usually at least $200, and I have seen signs in almost every rental car office that says they no longer accept cash for deposits. As a person who likes having the option to rent a car sometimes, I keep my credit card to allow for this reason alone!
3. Bad or no credit can spell certain death in a highly competitive housing market
Dave Ramsay is right, personal debt should consist of a mortgage only and we should pay that off as fast as we can.
But what about getting that mortgage to begin with?
Credit scores are used to judge us when we want to mortgage a house, whether we like it or not, and the reality is that the housing market in many places does not allow everyone the ability to save large sums of money to buy a house with cash. For example, the average cost for a house in 2020 in California is $580,000, which is actually a bit cheaper than the prices in my neck of the woods. Saving just 10% of that for a down downpayment would still be a whopping $58,000.
Additionally, Ramsay suggests that you don’t need to worry about building or improving credit for a mortgage, because a “good” mortgage writer will know how to look at your life holistically to get you approved, rather than just using your credit score as the only metric for approval. This, in my opinion, is a privileged view of how the world works, because not everyone has access to a “good” mortgage writer, or even has a way to guarantee the person they are working with is “good.” To suggest that everyone can just go out and buy a home without the Powers That Be considering your credit is just really not realistic in our current system.
Further more, many of us do not want to be homeowners, therefore we must rent a place in order to keep from living under a bridge. Landlords want renters with good credit scores and they are absolutely permitted to deny you housing based on that score alone.
The idea that the housing gatekeepers, be they the mortgage lenders or apartment landlords, have any obligation to look at your “whole picture,” rather than judging you on a single score is, well, wishful fucking thinking.
I’m not actually using the cards
I keep the credit card accounts open to improve my credit score, but I do not acquire a balance on the cards now that they are paid off. This means I am not accumulating debt, but I am using the cards in order to benefit myself in certain situations, like when renting a car, acquiring an apartment
Credit matters, a lot
Look, credit has existed in some form or another since civilization began, but FICO scores were only created in 1989.
This means that there are a lot of older adults out there who may have bought their first homes without needing a credit score like we are required to have these days. Credit scores are used to judge us, whether we like it or not, and to pretend that they don’t seems unwise.
I do agree with Dave Ramsay when he says that we shouldn’t buy things with our credit cards, we should save to buy things, but I think that credit plays such an important role in our contemporary 21st century lives that it would be a mistake to discount our credit cards completely!