Why Dave Ramsey Says ‘You Can’t Count on Credit Cards’
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Heather Taylor
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Amber Barkley
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Those who have spent their lives using credit cards — or perhaps more accurately, building up credit card debt — may feel nervous thinking about when they can close these cards and cut them up.
In a video clip from “The Ramsey Show,” money expert Dave Ramsey offered encouragement to a listener who was struggling to get rid of their last credit card. Here’s why you can’t count on credit cards to make your life better.
How Beneficial Is It To Close Your Credit Cards?
The listener who called in to Dave’s show for advice said they wanted to buy a house next year, and they wanted their credit score to be indeterminable. They quoted something Ramsey himself said about how having a credit card, even if you’re not using it, is more damaging than not having it. If they wanted their credit score to be indeterminable, would this still happen if they had a credit card open?
“No, it cannot,” said Ramsey. “You cannot be indeterminable while you have open credit accounts, even if there’s zero balance.”
Ramsey personality Jade Warshaw added that as long as the card is still open, it’s still reporting, even if it’s reporting a zero balance. This means that as far as your credit mix and credit utilization ratio are concerned, your open account can still negatively impact your score.
“What you end up with if you have one credit card open and a zero balance and no other credit accounts of any kind… you’re gonna end up with a low credit score, because you have almost no credit,” Ramsey said.
He went on to further explain the way the credit card algorithm works. If you have zero interaction with credit, that’s when you’ll end up with an indeterminable credit score. So before you open a new credit card account, keep in mind that all credit limits in your name can hurt your credit score, or at the very least affect your credit score.
The Interchangeable Definition of Credit
Nerves were another issue for the caller, who told Warshaw they were struggling with the idea of not having a cushion in credit cards. This is an understandable fear, especially since major credit card companies have been telling consumers for years not to leave home without their cards.
Ramsey said it’s normal to have this feeling, but he came to the realization you cannot count on credit cards to make your life good. You can count on yourself and your hard work and discipline, but not on a credit card company.
Instead of relying on credit cards and credit scores, Warshaw recommended giving yourself credit. Give yourself credit that you can budget and handle your own money.
“Isn’t it interesting how that word is interchangeable?” Ramsey said. “Credit as in ‘I’m gonna go in debt’ or ‘I’m gonna give myself credit.’ I’m gonna give myself the belief in myself.”
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