12/14/2004

Advice from Nashville's leading Financial Aid Advisor Dave Ramsey

 
Dave Says
By Dave Ramsey
Author of:
Financial Peace and
The Total Money Makeover

What's the big deal, Dave?

Dear Dave,

My brother-in-law is giving me a hard time about my credit card. It has no annual fee and I get money back from the credit card company for all of my charges. I’ve got the credit card for bills only. He tells me that you say there is no justification for a credit card. 

I do have a justification. My credit card is attached to my utility bills and to my mortgage. That’s all that goes on it. I keep the credit card in my checkbook and don’t keep it on me, so I can’t use it for anything else. I make $35,000 a year. I pay the credit card off every month and get that money back from the credit card company. So I am getting paid by the credit card company to use that credit card every month to pay my bills.

Where am I in error?

Chris in Toledo, OH



Dear Chris,

Your brother-in-law is right. There is no justification for a credit card. Why don’t you just pay those utility bills and your mortgage using a debit card?

Where you are in error is a good question. I’ve been doing financial counseling for more than ten years, with more than ten thousand families, here at our firm. I’ve repeatedly met families doing just what you’re doing and it backfired on them. Maybe the credit card company messes up something and their credit gets damaged. Then they spend the next three years trying to straighten things out. 

I’ve heard stories where someone had a credit card for six years that they kept in the checkbook, always paid off and were getting a 1% rebate on it. Then someone came by, slipped it out of there and charged $4,000 on it. That of course threw them into a tailspin. It was criminal fraud, but it happened and it cost them all kinds of time, money and heartache to get it corrected. If you carry around a loaded Uzi, even if you know how to use it, you’re in danger of the thing going off and shooting your foot off.

You’re dealing with a multi-billion dollar industry that is willing to pay you 1% back so they can take advantage of you that one time you stumble.

The bottom line is there is no possible way I would have that thing in my house. You can’t win with it. I’ve talked with hundreds of millionaires and I’ve never met one yet who said they got rich from 1% credit card rebates. There is too much downside for the little bit of upside to your plan. Over the years, I’ve never found anyone to whom credit cards bring blessings – even though some people, like you, think they do. I also try to look at what rich people are doing and copy them so I can be rich people. If I wanted to be poor people, I’d look at what they are doing and do that. I find rich people don’t do what you’re doing – trying to beat credit card companies at their game. They just go about the business of trying to earn lots of money, save and live on less than they earn. They don’t play with snakes because they know they can get bitten. I find people all the time trying to trick their way into a wealth-building program and rich people just don’t do that.

I challenge you to stop this little game and model yourself after wealthy people.

Dave

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