Credit Card Points: Why Experts Disagree With Dave Ramsey
Written by
Martin Dasko
Edited by
Caitlyn Moorhead
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Credit card debt for American consumers reached an all-time high of $1.13 trillion in the final quarter of 2023, according the Federal Reserve Bank of New York. As Americans struggle with debt, there are debates about using a credit card for rewards. Some personal finance experts aren’t fans of credit cards, while others believe responsible credit card use can help you build your credit and earn rewards.
Popular money expert Dave Ramsey isn’t a proponent of credit card points and rewards. He believes point accumulation comes with a hefty price tag via increased spending, since you may be tempted to rack up those points by buying more stuff. He also said that points could expire or have various terms and conditions that make redemption challenging.
But other experts disagree with Ramsey’s thoughts on credit card rewards. Why might credit card points be worth pursuing?
You Can Be Responsible With Your Credit Card Use
While it’s difficult to disagree that people prone to impulse spending should be cautious about using credit cards, responsible credit card use can help boost your credit score so that you can eventually get a lower interest rate when you apply for a home mortgage.
“The key is to avoid overspending just to rack up points,” said Gauri Manglik, CEO and co-founder at Instrumentl. “I always recommend paying your balance in full each month to avoid interest charges, which negate any rewards earned. With that discipline, points can add up quickly on everyday purchases.”
Just because someone earns credit card rewards doesn’t mean they’ll become irresponsible. You can still be a responsible credit card user if you’re focused on collecting points.
“You do not need to increase your spending to be eligible to redeem travel rewards,” said Danielle Desir Corbett, personal finance expert at The Thought Card. “Treat your credit card like a debit card. Instead of waiting to make one monthly payment, pay off your balance as you go, preferably daily just like a debit card.”
You Can Turn Your Expenses Into Rewards
Experts have noted that credit card points can be earned from expenses you would pay either way, so you might as well earn some rewards in the process to help stretch your budget even further.
Manglik provided an example of how points can be accumulated through everyday purchases: “I put all my household expenses on a 2% cash-back card. Last year, I earned over $600 in rewards, which I redeemed for gift cards. That’s $600 of free money I wouldn’t have gotten without using my points card.”
You Have To Spend the Money Either Way
On a similar note, you can use your rewards credit card to benefit from purchases you were already going to make. While Ramsey feels that your attraction to credit card points could lead to increased spending, the reality is that you’re leaving money on the table if you don’t get some perks for your purchases.
“The key to getting value out of credit card points is not to spend more than you typically would just to earn the points, but instead to use the card normally,” said Josh Bandura, co-founder of Frugal Flyer.
If you’re going to pay for expenses, you may as well earn rewards that come in the form of cash back or travel perks.
You Can Cut Travel Costs
If you travel often, using a travel rewards credit card to accumulate points and save money in the future makes sense. If you find the right travel rewards card, you could earn points that lead to free flights or accommodations.
“Credit card points are worth collecting, as they are an easy way to cut travel costs when redeeming for flights, hotels and rental cars,” said Bandura. “Financial institutions make it easy to earn large amounts of points through welcome offers, and not taking advantage of points would be disadvantageous in the current economic climate, especially for those still looking to travel at least once per year.”
You also can’t ignore perks associated with some travel rewards credit cards, like lounge access or priority booking.
Corbett added, “The potential for a free hotel stay or airfare can unlock elevated travel experiences or can even help you travel more.”
You Have Unique Spending Habits
While credit card rewards come with terms and conditions, you can choose which one you go with. This means you can find a credit card that aligns with your spending and allows you to earn rewards.
“Just be sure to compare cards and select one that offers perks aligned with your spending habits,” said Manglik. “Used wisely, credit card points are an easy way to get a little extra back on the things you’d buy anyway.”
The Terms Aren’t Hidden
Ramsey argues against credit card rewards by pointing out that companies can change their points system whenever they feel like it. While the redemption rules may change, the terms aren’t hidden, and you can browse through various options before deciding which credit card to use.
“If you do plan on collecting points within a specific loyalty program, it is important to ensure you understand the terms and conditions of the program, including any unique features, such as how to redeem points and if points ever expire,” Bandura said. “While this does require some additional work upfront, it will pay off down the road to ensure your hard-earned points don’t go to waste.”
Credit Cards Are Another Financial Tool
Ramsey notes that millionaires he knows didn’t build wealth through credit card points. While this may be accurate, it’s also true that most people have to rely on a credit card to build credit to even apply for a loan.
“The idea of using a card that gives you a little something in return isn’t inherently bad,” said Daniel Cohen, a founding partner at Consumer Attorneys. “Just pay attention to the interest rates and terms, of course, and use due diligence in selecting the right card based on the whole picture, not just the reward offered.”
If you pay as many bills as you can with your credit card to get reward points, redeeming points makes sense to earn cash back or other perks.
Cohen concluded, “No one would argue that people are becoming millionaires by accruing credit card points, so it’s a bit of a non-sequitur to point out that the millionaires he knows didn’t become rich that way, either. You should re-evaluate your approach if you’re looking at points to amass wealth.”
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