Sometimes Dave Ramsey gives stunningly bad advice

For those who haven’t come across the man, Dave Ramsey is a well-known American radio personality who likes to offer financial advice. I have no idea what his qualifications are, but the advice he likes to hand out covers many areas of people’s personal finances, and he is particularly known for being vehemently opposed to the use of credit cards.

Generally speaking, I don’t really care what Dave Ramsey has to say because I’m not his target audience, but I start to care when he chooses to make statements which are factually incorrect, and when he starts to give out advice which has the potential to be detrimental to someone who follows it.

It’s not always as simple as “this is always good and that is always bad”

Whenever I attempt to give advice on here, I do my best to make sure that the advice has all necessary qualifying statements alongside it because, often, things aren’t clear cut.

I don’t claim that there’s a one-size fits all way to do things that will work for everyone, I make sure that I point out who the various deals, sales, and promotions I write about will work for and for whom they won’t, I make sure it’s clear for whom various credit cards will work and for whom they won’t, and I’ve been as clear as I could possibly be (on a number of occasions) that no one should be applying for travel rewards credit cards if they cannot pay off their balance every month.

I’m very aware that life isn’t black and white. There are various shades of grey in between, but this is something that, apparently, Dave Ramsey hasn’t noticed (or chooses not to notice).

Allow me to give you an example of what I mean.

Just the other day, this Dave Ramsey Instagram reel appeared in my feed.

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In this short reel, Ramsey makes the following points:

1. Your debit card can do everything your credit card can do. Every single thing.
2. He and Sharon (I assume that’s his wife) have travelled in other countries 6 times in the past 12 months and used a debit card 100% of the time.
3. He and Sharon haven’t had a credit card in 36 years.

Essentially, all credit cards are bad, all debit cards are good, and Ramsey is advising people to use debit cards for everything (because they’re just as good as credit cards). He’s advising people that it’s a good idea to only use a debit card when traveling abroad.

The first bit is false information and the second bit is truly terrible advice.

Leaving aside all the arguments about how a debit card used correctly will not help you get a good credit score while a credit card used correctly can, anyone who has ever tried to rent a car will know that a debit card is not a great instrument with which to try to pay – it can be almost impossible to find someone to rent you a car without a credit card.

Drop by your local Avis and try to rent a car with your debit card and let me know how you get on 😁

Given that Ramsey claims to have traveled quite a bit, I’m surprised he doesn’t know this.

Also, a debit card will not offer you the kind of car rental coverage, flight delay coverage or any other kind of trip/baggage coverage that a credit card can. Again, for such a well-travelled man, I’m surprised Ramsey doesn’t seem know this.

But neither of these blindingly obvious inaccuracies were what bothered me the most about what Ramsey had to say, because there is one other thing that a credit card does that no debit card can and by not telling his audience about it, Ramsey is doing them a huge disservice and, potentially, opening them up to risk.

A credit card will protect your money from thieves and scammers. A debit card will not.

If a scammer gets hold of your credit card details and goes around town using them to party like it’s 1999, that’s the bank’s money that they’re playing with, not yours.

Will you be inconvenienced when the bank puts a hold on your card or, more likely, cancels it when the fraud comes to light? Probably. But as long as you have another card with you, life goes on. You’re not out of pocket (the bank cannot make you pay for purchases that you did not make) and your own money is still out of harm’s way in your checking account.

If, however, a scammer gets hold of your debit card, they now have a direct line into your personal bank account and if they manage to extract cash from that account or make purchases with your card, that’s your money they’re playing with, not the bank’s.

Yes, federal law will still protect you (as Ramsey is very keen to point out), but you may be liable for some of the transactions the scammer makes (it will depend on how long you take to report the crime) and it may take time before whatever has been stolen from you is returned.

The bank and/or card processor will need to investigate, and that can take days. If something looks odd to the bank/card processor, it may take longer before a provisional credit is added to your account (details here).

If you’re just out a couple of hundred dollars for a few days, that may not be the end of the world. But what happens if the bank puts a freeze on your checking account? What if the scammer manages to empty the account to which the debit card is linked? I’m going to go ahead and guess that, for quite a few people, that would be an issue. Even if it’s only for a few days. Bills still have to be paid, right?

If you’ve been following Ramsey’s advice, you won’t have a credit card as a back up (all credit cards are evil, apparently), so unless you have a second bank account with a second debit card, you may find yourself in a bit of trouble. Especially if this happens to you while you’re abroad.

For some reason, this isn’t something that Dave Ramsey seems to want to point out.

I’ve had to delve into other reels that he’s released to see what he’s been saying and while I’ve heard dozens of versions of his “credit cards are bad, debit cards are good” patter, I haven’t yet found any evidence of him pointing out the issues that debit cards can cause.

Credit cards are not for everyone but …

Clearly, credit cards are not for everyone. If you struggle to keep on top of your spending or to control your finances, holding a credit card could be detrimental to you, but that doesn’t make credit cards universally bad (as Dave Ramsey would have everyone believe).

Sure, if you’re not in a position to pay off your credit card(s) at the end of every billing cycle, the travel rewards cards that we often discuss on this site are not something that you should be toying with – the interest you’ll be charged will vastly outweigh any of the benefits the card affords you.

But that doesn’t mean that there aren’t suitable credit card products for people in that position. I’m not going to discuss those here because they’re not my area of expertise, but it’s important for people to be told that just like with a lot of other things in life, there’s good and bad in the world of financial products and credit cards can be among the good and the bad. A bit like debit cards.

You just have to work out what works for you, and the idea that all credit cards are bad and all debit card are good is nothing but irresponsible nonsense.

Bottom line

Are credit cards for everyone? No, of course not. Will a debit card be useful for a lot of people? Yes, it probably will be.

Can a debit card do everything a credit card can? No. Definitely not. Should people be traveling around the world using a debit card for all their transactions? No, they really, really, shouldn’t.

A debit card is a direct link between whoever has that card’s details and the debit card holder’s bank account, so why would you travel the world carrying that information with you wherever you go?

That’s just asking for trouble, and while trouble may not find you this time, the next time, or even the time after that, when it eventually does find you, the fallout is likely to be much more time consuming and troublesome than it would have been had you just had your credit card details stolen.

Remember: When a thief is using your credit card, that’s the bank’s money they’re spending. When they’re using your debit card, that’s your money they’re spending, so why would you risk the latter even if you will, eventually, probably get it back?