This is a sponsored post by CreditRepair.com. All opinions are 100% our own.
Dave Ramsey is a household name – and for good reason. He helps millions of people get out of debt – but do you agree with all of his advice?
We think it’s worth looking at advice from a personal finance expert and working out which parts work best for you.
You don’t have to do exactly what anyone says, but look at the pros and cons of various decisions and make the best one for you.
Today we are going to look at the things that Dave Ramsey says about credit cards and credit scores.
If you’ve been following Dave Ramsey advice at all, you’ll know that he is strongly against having credit cards at all.
But did you know that only 35% of credit card users pay off their credit cards in full every month? This is according to a study released by the Boston Fed, and means that a huge 65% of people don’t pay off their credit card in full each month.
1) There’s NO good reason at all to have a credit card.
In case you don’t know about Dave Ramsey’s back story, he found himself in a lot of debt and had to declare bankruptcy. He turned it all around though and now helps others pay off their debt.
In his opinion, credit cards just aren’t necessary. He thinks that debt should be avoided at all costs, and that includes having credit cards.
He thinks that you should always use a debit card – that there’s simply no point in having a credit card.
He also thinks that you don’t need a credit score. He feels the only reason you need a credit score is to go into more debt.
While this may be true the number of families that actually have enough money to pay cash for a house is extremely small. Leaving your credit score as your report card and trust factor in getting a low-interest mortgage.
2) You WILL overspend using a credit card vs. cash.
One of the reasons that people give for using a credit card versus not using one, is that you can get rewards in exchange.
Dave Ramsey says screw the air miles and cashback rewards that are on offer – you are not beating the system.
He argues that you can get better deals with cash. Something that we thought was interesting is that he says the wealthy people in the country don’t care about their credit score – they are wealthy from saving and using cash.
Did you know that when you use a credit card you don’t use your emotions in the same way that you do with cash?
A study by Carnegie Mellon, Stanford and MIT showed that when you pay with cash, it ‘hurts’ more to pay than if you were using a credit card.
If you haven’t got the feeling of pain when you are handing over your hard-earned cash (i.e. when using a card), then you will spend more.
Make sure that you have a budget in place to manage your money properly, and using cash should help you to keep on track.
3) You MUST pay off your high-interest credit card debt ASAP.
If you do want a decent credit score, you will need to pay off your high-interest credit card debt as soon as you can.
As tempting as it is to keep putting stuff on your credit card with the intention of paying it off in full each month, the fact is that 1 in 3 Americans are behind on bills.
Paying off high-interest debt first is called the debt snowball method – something that Dave Ramsey is a huge fan of.
Getting rid of your credit cards is a priority, and will also help your credit score because you can show that you are able to pay creditors.
Dave is a personal finance expert so it’s wise to listen to him.
Although we do agree with him when it comes to getting out of debt, budgeting your money, and using credit cards responsibly (if at all) we do still feel a good credit score is very important.
From our experience purchasing our first home, we would have never received such a low-interest rate at 3.5% if we did not have excellent credit scores.
So while you are working on paying off your debt and learning good financial habits is a great idea to learn more about your credit score and how to improve it.