While many of us swear by credit cards to get us through some of the most expensive times, financial expert Dave Ramsey expresses that swearing off credit cards is a better option. For 25 years he has been reiterating these words and is continuously urging people to cut their credit cards and close their accounts for good. “There’s no good reason to play with snakes,” he told HuffPost. “They bite.”
For Ramsey, who writes books about managing finances and carries only a debit card, credit cards could be ripping you off, and this is how.
Airline credit cards
While they may sell it to you by accruing miles the more you spend, there are catches that come with this credit card. An airline credit offers you a mileage point for every dollar spent, with an $80 annual fee. Say you spend $8,000 in one year, and with 25,000 miles needed for a free one-way ticket, it will take three years to reach this point. By then you would have spent $240 on annual fee’s, which could be more than a round-trip ticket! Do not forget that some miles might even expire before you even get to use them.
“I never once heard a millionaire say, ‘My big breakthrough came from the cash back I got on my credit card.’ It doesn’t happen,” Ramsey said. “Cash-back” cards don’t always give you actual cash back. “You have to spend thousands on a credit card to get a measly $100 cash back,” he said, adding, “And [in many cases] it’s probably just a credit applied to your account, not actual cash in your pocket.”
Looking at Amazon’s “5 percent back” card, which is offered on items purchased on the site, you have to qualify as an Amazon Prime member to even get one. To become a Prime member, you have to pay $99 a year, which looks pleasing based on the benefits it includes, such as free shipping and streaming entertainment.
However, to break even on the Amazon Prime Rewards Visa Signature Card’s 5 percent cash back promise, you have to spend $4,950 annually on Amazon! While this may work for people who are already Prime members, newbies should check their spending from last year to see if they will be spending this amount before signing up.