Dave Ramsey and buying a house.
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Anonymous
Yes, he is a big believer in ripping off the band-aid and getting your debt paid off. If that means forgoing Friday night pizza, your Starbuck's habit and doing a staycation this year, so be it. But I had never heard of him telling people to cut up their credit cards altogether and pay for everything in cash instead. That would be nice to do in theory sure. But it is not practical advice. Buying old cars that you can afford to pay cash for only works if you are pretty handy with keeping old cars running. |
Anonymous
?? That's pretty much his first piece of his advice. Have you ever actually listened to his show? |
Anonymous
Seriously? This is typical Dave Ramsey. This is one of his main points. He doesn't believe in credit at all. So yes he does tell Powell to cut up their credit cards and never use any credit ever. That is like his whole thing. |
Anonymous
I don't listen to his show actually. I knew that he was a proponent of paying down debt but I didn't realize that he was an extremist with regard to not using credit - ever. Basically, I agree with his whole pay down/keep your debt manageable philosophy. But I think that his advice to forgo credit cards/loans of any type altogether is a bit extreme. |
Anonymous
Dave Ramsey tells you to get a debit card tied to your checking account. You can buy airline tickets with a debit card (like a bank card with a visa logo on it). You can check into a hotel with one too, but they put a $300-$500 hold on your card. I don't know how it works with rental cars. I think they put a hold on that too. |
Anonymous
I pay cash for my cars. I try to buy 3 year old cars. My last one was $20k after my trade-in. I paid with a check that drew on my money market account. But having said that, I still do have credit cards. I pay them off monthly. And we have a mortgage. |
Anonymous
Not everyone is comfortable giving direct access to their checking account like that. How do you dispute charges? |
Anonymous
The same way I do with a credit card. You call the number on the back of your card and say you didn't make that purchase. They close your card and send you a new one. |
Anonymous
What if a charge has already been taken out of your checking account which causes other problems - with automated bill paying for instance. I have never done this so I really don't know. If you check into a $180/night hotel, the hotel will debit your account the $180 plus put a $300-$500 hold on your checking account...so that (I am assuming) if you fail to leave the room or damage the room or run up charges at the hotel, the hotel will have some sort of recourse. If you check in/out as planned, the $300-$500 hold is taken off your account and that is that, you get access to the hold money again. But what happens if some crazy person runs up a big bar tab and bills it to your room? The hotel debits the tab from the hold money and then refuses to return it. What good would cancelling the card do you? The hotel already has your money, right? |
Anonymous
You check into a $180 hotel room, and the hotel puts a $300 hold on your card/checking account. When you check out, you settle your account, just like you would if you checked in with a credit card (so $180 per night plus taxes/fees, plus any room charges). If you want to pull out a roll of cash and pay with cash, you can at that point too. |
Anonymous
And for the first issue, I get an alert if I have a sub-500 balance in my checking account. If this was unanticipated, I would look into it asap. |
Anonymous
The drawback of this approach is that you're out the money while the dispute is being resolved so depending on the size of a fraudulent charge it can be an issue. I thought his issue with credit cards is that people can't control their spending and making people use a cash system makes them think more about what they're purchasing. I think you lose a lot of that with a debit card and the only major difference is that you can't run up that much of a balance beyond what you have in your account depending on your bank's overdrafting rules. |
Anonymous
This is where your emergency savings comes into play. I have never had a fraudulent charge greater than 3-6 months worth of living expenses. You "borrow" from your emergency savings and pay yourself back the following week when the money is returned to your checking account. I also don't keep a high balance in my checking account: just what I need to cashflow my bills. The rest gets moved to savings/investments immediately. So at most, we're talking about $5,000 or so. In my experience, credit card fraud is taken out in small amounts first before they go for big purchases, and even the big purchases aren't big enough to wipe out my entire checking account balance. But I do agree with your second point: using real cash is better, unless you are in a situation where you can't (travel, online purchases, etc). I think debit card use is more appropriate after you have addressed the behaviors that got you into debt in the first place, and learned self-control by using real cash for everything. |
Anonymous
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With regard to credit cards, Dave Ramsey is for the alcoholics of the financial world.
Everyone has their weaknesses - for some it's alcohol, for some it's spending, for some it's chocolate, and for others it's something else. You could lock me in a room with top shelf liquor, wine, and beer, and I wouldn't open a bottle. Similarly, you could lock me in a room with a credit card with tvs blasting opportunities to buy clothes, jewelry, cars, and I wouldn't buy anything I don't need. On the other hand, lock me in a room with chocolate, and I'm a goner. Dave Ramsey gives his credit card advice to everyone as if they are all weak when it comes to buying things they cannot afford. Many people aren't, and there is no reason these people should cut up their credit cards any more than non-alcoholics shouldn't go to a bar. |
Anonymous
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Also, debit cards have WAY less protections against fraudulent charges than regular credit cards.
My own take is that if you can pay your credit cards on time with no late charges for 2-3 straight years, go ahead and use them. Moving incurs lots of expenses: 1) Possible loss of deposit 2) One weekend every X months -- you have to at least pay for pizza and beer for the people who're helping you move. After about 30 (at least in this area) this sort of thing becomes harder and harder to find. 3) If you have more stuff or valuable stuff then you'll need movers. Also, how many women REALLY agree to live in a crappy 2BR apartment for years with 1-3 kids while you get your financial act together? |