Why I'm not a Ramseyite

[disneysteve]

But not as much as in luring people to their potential doom.

True. Today, CC companies actually make the bulk of their money on interest and fees, not merchant payments. It's all of the people carrying endless balances that pays for people like me to get nice cashback checks and free vacations with our Marriott card.

I'm perfectly happy to play the game to my advantage. The card companies don't care if I beat the system because even on my account, they're still making money from the merchant fees. Let's say we charge an average of $50,000/year to our cards. At 3%, that means they collected $1,500 in fees from our usage. We earned rewards but not $1,500 worth so they still come out ahead. And they make the big money from all the folks who don't pay their cards off monthly who they're hitting for 15 or 18 or 29% interest.

[moneybags]

I don't think that's true. CC companies collect 3% merchant fees on every transaction. Even if every customer paid their bill in full and on time every month, they'd still be collecting those merchant fees. The business wouldn't be as lucrative but it wouldn't go away. Rewards might become less generous. I mean Discover can't give me 5% cash back if they're only making 3% on the usage. But there would still be plenty of money to be made. I can't find a number for how much is charged to credit cards each year but it has to be in the billions or trillions. Let's just say it's $1 trillion. Even if all they get is 3% of that, that's still $30 billion/year in income.

Then there are things like annual fees that even very responsible users pay. I pay one annual fee myself but I feel it's well worth it for the benefits the card provides us.

It's not 3% for every merchant. Merchants have the ability to negotiate with the credit card processors. Unfortunately, I think Walmart probably pays a lot less and small businesses are usually at the 3%.

[Nutria]

It's not 3% for every merchant. Merchants have the ability to negotiate with the credit card processors. Unfortunately, I think Walmart probably pays a lot less and small businesses are usually at the 3%.

High volume always makes for lower prices...

[disneysteve]

Unfortunately, I think Walmart probably pays a lot less and small businesses are usually at the 3%.

Why is that unfortunate? The bigger the business, the more negotiating power they have. That's why a place like Walmart or Amazon can have such low prices. They buy in huge volume.

Or did you mean it was unfortunate for the small businesses? That's where great service comes in. If I go to a small business, I do so expecting a much different experience than at a big box retailer. I expect staff that is friendly and knowledgeable about their products. I expect merchandise that I probably can't find at the big box places. I'm willing to pay more for a more personal and unique shopping experience.

[Gailete]

I find this discussion interesting. I don't follow DR although for most things I do agree with him. However, my youngest son does follow him as much as he is able, and a very good thing too. He makes enough to live on, but just barely. He has a debit card which has been ample for him to use for plane tickets, car rentals and motel fees. But those trips he takes only after saving up for them. I would shudder to think what would happen if he got a credit card and used it 'just this once'. Not become he is frivolous with his money, but because he can't afford to put even $100 on a credit card and expect to pay it all back when the bills comes around. Those little charges he might make, such as for gas, instead of using gas cards that he gets for doing surveys. He might never let himself get in bad debt but knowing he can't pay it all off would drive him crazy and wouldn't be good for his finances. So even though he doesn't have a credit card problem, he refuses to get one. He knows it wouldn't be good for him.

[Nutria]

He has a debit card which has been ample for him to use for plane tickets, car rentals and motel fees.

That's interesting, and good to know.

So even though he doesn't have a credit card problem, he refuses to get one. He knows it wouldn't be good for him.

My son doesn't want one either, since he doesn't trust himself to use it wisely.

[bjl584]

Dave is speaking to the average family struggling financially. To them, his advice is sound. To someone more advanced, his advice seems unnecessary and even foolish.

Tell an entrepreneur or a real estate investor to not use leverage to expand their business or portfolio, and they'll laugh at you.

[Nutria]

Dave is speaking to the average family struggling financially. To them, his advice is sound. To someone more advanced, his advice seems unnecessary and even foolish.

• In 2014 (the last year I have stats for) only 34% of people carried revolving CC debt.
• He says that everyone should cut up their cards.

[LivingAlmostLarge]

Maybe but for most people they need to be told don't carry a credit card balance. I can't tell you the number of people who say they don't have CC debt but then say they do but pay it off every year with their annual bonus! Okay so you run up debt then pay it off. OMG.

[Gailete]

Maybe but for most people they need to be told don't carry a credit card balance. I can't tell you the number of people who say they don't have CC debt but then say they do but pay it off every year with their annual bonus! Okay so you run up debt then pay it off. OMG.

Goodness, what happen if they don't get that bonus????

[Nutria]

Maybe but for most people they need to be told don't carry a credit card balance.

The implication of needing to be told to do this is that you aren't a responsible adult, which means that you shouldn't have the right to make decisions that affect people other than yourself.

[disneysteve]

The implication of needing to be told to do this is that you aren't a responsible adult, which means that you shouldn't have the right to make decisions that affect people other than yourself.

What's your point here? Yes, many people aren't responsible, sometimes though because they've never had anyone sit them down and teach them anything. They aren't being consciously irresponsible. They just don't know any better.

[Nutria]

What's your point here? Yes, many people aren't responsible, sometimes though because they've never had anyone sit them down and teach them anything. They aren't being consciously irresponsible. They just don't know any better.

Someone who -- LAL's words -- needs to be told what to do (not suggested, but TOLD what to do) is not capable of... I dunno... voting responsibly.

[disneysteve]

Someone who -- LAL's words -- needs to be told what to do (not suggested, but TOLD what to do) is not capable of... I dunno... voting responsibly.

I think you may be getting hung up on semantics. When you learned to drive, your instructor didn't "suggest" what to do. He or she told you what to do.

Sometimes teaching is just that - telling someone what they need to do. If I'm trying to help someone with credit card debt, you can be sure I'm going to tell them not to carry a balance (once they pay off their existing debt). If someone is just starting out and getting their first credit card, like our daughter did a few years ago, I'm absolutely going to tell them to never charge anything that they don't already have the money to pay for and to pay the bill in full each month and never carry a balance. I don't think that makes the person irresponsible. I think it just makes them uneducated and in need of guidance.

[bjl584]

• In 2014 (the last year I have stats for) only 34% of people carried revolving CC debt.
• He says that everyone should cut up their cards.

He's wrong.

https://medium.com/@grantcardone/dave-ramsey-is-great-but-hes-wrong-f440c537b8c3