Credit Cards and Dave Ramsey
by Ross on Mar.24, 2009, under my thoughts
We’re busy going through a series called “Life. Money. Hope.” at LifeChurch.tv by Dave Ramsey. He has a simple (and obvious) principle: “live like no-one else, so that you can live like no-one else”, and his first bit of advice… cut up your credit card.
A lot of people seem to think this is a really good idea… I think it’s absolute madness. I don’t mean to insult those people, or Dave, I just can’t imagine NOT having a credit card. I mean, what if I was stranded in Mexico with no money on me… no problem, Credit Card to the rescue (accepted where ever the “Master Card” or “Visa” logos are displayed). I’m not sure how I might find myself stranded in Mexico, BUT YOU NEVER KNOW! And they say cut it up – yeah right, don’t they know we’re best friends.
Or maybe a more likely example (though some might think less likely), imagine I’m out on a date only to find I’m a few bucks short – how would you get your way out of that one… start washing dishes, ask her to cover the tip? I think not. Credit Card to the rescue… again. Sure, you pay the price of slavery to debt/credit, but at least you have The Power Of The Card whenever you need it – just one swipe and all your problems disappear (until the end of the month, and then they gang up on you).
Anyway, today I went and got myself a “pre-paid debit card”… apparently they work like credit cards, only without the credit. I figure this is the obivous step to weaning myself off my credit card. I’m starting to think it wont do all the things my credit card does – specifically international payments over the internet (it would be a real pain to pay through other methods).
The obvious problem with credit cards, is the “credit”. Sure, when you get it you promise yourself (and those around you) that you’re only going to spend money you really have, but that doesn’t always work out so well. So what’s the best way to go about cutting up your credit card (possibly “metaphorically”, in my case). While cutting it up on the spur of the moment may seem like a really good idea, what if you don’t have any other money to get through the month? Then what’re you going to do – spounge of other people, and pay them back at the end of the month? That’s still credit. Or you might go running back for a new card… which you’ll have to pay for… making you worse off than when you started.
The other option is to wait until the end of the month, pay it off, and then cut it up… which in my case wouldn’t leave much cash left over to make it through the month… leaving me running back for another card. So my thinking is… get paid at the end of the month, keep the money, and cut up the card. Oh… and pay the minimum amount on my credit card that I have to, and then save some money to pay off extra the next month, until it’s paid off. Sure I’d be paying interest on the money owed on my credit card, but who said freedom was free? (which I guess makes it a bit of an oxymoron in this case).
The other thing my credit card does for me (as mentioned previously) is take all the effort out of payments – all my bills are linked to my credit card, and just go off whenever… and I don’t check my statements… ever… like not even at the end of the year – how’s that for bravery (or laziness). I’m not sure whether to leave this system in place (even with out a card the account still exists, and money would still be deducted), or start paying for all those things manually. Like I said, it’s those international payments I’m worried about, though I think I’d be quite shocked if I saw the money I was spending each month without realising it.
Perhaps the day will come when I cut up my card – I mean, it’s a good principle… until you’re stranded in Mexico – but it might only be after this year’s Christmas shopping, which will be just before it expires and my new card arrives. Wish me luck :)
(On a closing note, Dave Ramsey’s incredibly smart and funny, and I’d have to be a fool not to listen to him – and you know what they say about a fool and his money… co-incidence? me think-eths not)
You can watch Dave Ramsey by clicking on this link: http://www.lifechurch.tv/message-archive/watch/life-money-hope/1
March 24th, 2009 on 4:29 pm
What’s wrong with a Visa/Mastercard debit card tied directly to your checking account (not prepaid) where you can pay bills automatically, or cover the cash shortage on a date, or bail you out in Mexico, or make international payments, or anything else a credit card would do.
Except you have to have the money of course…
March 24th, 2009 on 5:51 pm
Hmm… good point… my checking account doubles up as a debit card (as far as swiping it goes), but not for online transactions that only accept credit cards (no expiry date or cvv) – which the pre-paid debit card’s for (it has those). Man this is going to be a tough ride :P
March 24th, 2009 on 6:23 pm
I think Dave’s focus is on stopping to spend. If you don’t have a credit card you can’t go into more debt.
It’s much easier in the U.S. to get into debt with credit cards.
Not so in S.A.
If you’re not a “lover of money” then you wouldn’t need to “cut up your card”. Credit cards have a lot of perks. With some you get free medical insurance when you fly (up to R1m). With some you get miles. With some you get free insurance on rental cars. Cash back. A concierge to book hotels etc. for you (for free).
If have a lust for spending + a credit card. Then the first step to getting out of debt is to stop making more debt.
I’m going to live happily with a credit card, because my debit card is not insured like my credit card is.
If someone steals my money with debit, chances are I wont get it back. If with credit, easy.