Orman and Ramsey Duke It Out (in my head)
I have a confession. Though Dave Ramsey fanatic and groupie I am, I have in my hands a credit card that I accepted. In In Women & Money: Owning the Power to Control Your Destiny
Don’t tell my Dave Ramsey Financial Peace University Counselor.
Truth be told, and I’ve been candid about this before, my husband and I got into some financial trouble a few years ago and cut up every credit card we had. We had vowed never, ever to get another credit card as long as we lived. Man, I wish I could have lived up to that.
But, here’s the thing, in The Total Money Makeover: A Proven Plan for Financial Fitness
Pay cash for everything, Ramsey says. I’m a total convert to the principle. However, I’ve discovered first-hand four real world scenarios in which I NEED a better credit score.
* We haven’t bought our first home. We’ve been approved for 100% financing, but the interest rate isn’t that great. If we had a better FICO score we’d be offered a better rate. The way to get a better FICO score is to use a credit card and pay the bill. Having no credit card only allows the clock to tick on negative credit and doesn’t improve the score much. It would take us a couple of decades to be able to pay cash for a home and I just can’t muster up that kind of dedication to the cause, while we suffer terribly from mold allergies in our current residence.
* I’ve been denied employment due to my poor FICO score. It’s embarrassing and humiliating to admit, but I’ll tell you so my fellow poor-credit citizens don’t feel so alone. When we were paying off our debt with extra crappy jobs a bank denied me a job as a data entry operator because of my poor credit score. While I’m working from home now, I need to know that I can get a job if I need one. I also need to know that my husband can look for another job should he need to.
* We can’t afford to lend my husband’s employer money out of our monthly budget. Most companies do this, I guess, but they expect you to charge expenses on your personal credit card and reimburse you later. Well, if you don’t have a credit card that comes straight out of your monthly zero-based budget. Who can afford that? Dave Ramsey suggests that we should have a savings account for this. But, on what planet do I have enough money laying around to lend to my husband’s employer so he can go on a business trip to Chicago for a week? Not planet Earth, which is where I live.
* The last reason is that my FICO score is effecting the rates I get on my car insurance and will effect my home owners’ insurance rates.
To be honest, I’m totally conflicted about my choice to get a credit card. Suze Orman recommends that I have one in my name only. I do now. But, I wish I could have boycotted credit card companies forever.
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20 opinions for Orman and Ramsey Duke It Out (in my head)
Maggie
Aug 3, 2007 at 8:47 am
I love Dave Ramsey, and I love Suze. Clearly, Suze is the winner here. Debt-free is great, and having a credit card does *not* mean that you have to go into debt.
It does mean that you can reserve a hotel, rent a car, find a great deal online that saves you money (I’ve needed a credit card for all of the above - no way in hell I’d use my debit card where my “real” checking account money is in case of fraud, etc., *way* more protection with a credit card and not hitting your actual cash if there is any issue), pay off all of the above at the end of the month without owing interest and even collect on the often more than decent rewards with the right credit cards (I’ve been to restaurants we never go to regularly because of all the $25 & $50 gift cards I’ve racked up as rewards). Meanwhile, yes, such responsible use will help your credit score, and that absolutely does matter more and more every day if you want to be considered for certain jobs, buy insurance, get decent rates on borrowing that one day you just might need (yes, I know, I know, in theory you won’t need to - until the unexpected and unspeakable and very expensive thing happens when some things are more important than money and more important than the principle of not having any debt, and you find that actually, yes, you do need to borrow money for something not even remotely frivolous because it matters).
Suze wins. You do, too. This is not a “bad” thing you’ve done by getting the card as long as you use it the right way, which it sounds like you’ll be inclined to do listening so much to those two.
I don’t understand the getting it in your own name thing if you are married and can just as easily add or subtract a spouse who would be responsible (in most states, anyway) whether his name was or wasn’t on it, but I haven’t read that book yet.
Klint J.
Aug 3, 2007 at 1:44 pm
I think Dave Ramsey only gives good advice to those that are either too ignorant to control their own finances, too frivilous to control their own finances, or too undiciplined to control their own finances.
HOnestly, credit is a very good thing. This holds true only when you use it wisely and for your own benefit. Dave Ramsey does not trust his readers to do this, and for that he ought to have no one purchase his books. Mr. Ramsey ought to be writing chapters in his book about how to use credit properly and to your personal benefit. Yet, he does his readers a disservice, making them fearful of something that really ought to be an asset to their financial self-sufficiency. I know it is a vital part of mine.
Tracee
Aug 3, 2007 at 2:55 pm
Klint, the average American graduates from high school or college without knowing how an interest works. Before you’re out of high school you’re offered credit cards. It’s not as if the credit card companies are opperating on the up and up. Every day there’s some newfangled polcy designed to screw the consumer and I believe it actually takes an incredibly financially savvy, educated and aware person to not get in some trouble with credit right out of the gate.
Ramsey’s audience are a lot of people in financial trouble and he offers a sound way out. Credit cards are not going to help you out of trouble.
Before being so judgemental about “ignorant, undisciplined and frivolous” people, such as myself, who get in financial trouble perhaps you should consider that not everyone has a masters’ degrees in finance. Some of us wasted several years learning required college algebra instead.
Tracee
Jen
Aug 4, 2007 at 2:26 pm
Tracee, I think you made a good sound choice here. The difference between you having a card now, and when you had a card several years ago is that now you have the knowledge and tools to make that card work for YOU, not the credit card co.
I mean, clearly not having credit is costing you money.
Jason Green
Aug 13, 2007 at 10:24 am
I finally will pay off my last credit card this month (Friday)! While I am certain I will never use them again, I haven’t decided whether to close the accounts. I have already closed several accounts, and probably will end up closing them all, and just living with the fact my car insurance might go up in 7 years :) I cut up the plastic long ago.
You might shop a little more for mortgage companies, you should be able to get the best rate with manual underwriting. As long as there is no bad credit on your bureuas. Maybe not for 100% financing, but your FPU class should teach you to have a down payment anyway :)
As far as getting the card, the biggest thing is that you and your husband both decided it was the thing to do. I was a little worried you did it behind his back, but then I thought you surely would not blog about it if that were the case! :)
Take care and good luck!
Jason
Tracee
Aug 13, 2007 at 11:22 am
My husband and I are in agreement.
I’m still chasing the American Dream - but tus far it’s still a dream and the NO Credit ever rule is interfering with me getting there.
We are HAVING credit cards, and systematically using them to charge small amounts of money we already have for things we already buy. In other words, we are not charging things we aren’t normally budgeting in our Zero based budget.
Jason Green
Aug 13, 2007 at 11:47 am
Well being aware and paying attention are the biggest things, so you probably won’t “lose your heads” as Dave would say. Ever since college I used credit cards and paid them off, never had a cent of interest for 7 years or so… that was until I was laid off and got engaged within a 6 month period. Then I decided it was “worth it” to put our honeymoon on credit, which kicked off a bad habit of using credit cards to catch our slack occasionally. We would get them paid off, but then use them again. I also never planned to pay off my wife’s student loan early, because I am such a math nerd (bachelor’s in Electrical Engineering). When I started listening to Dave it was amazing how stress relieving it was to know I was done using credit cards forever! I’m divorced now, but thankfully through that I was able to not go further into debt, and even make a little progress on debt during that time.
Again, good luck to you guys… sounds like you’re on your way to “winning!” :D
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Jerry
Sep 7, 2007 at 5:33 am
I am amazed at all the people who think you need a credit card and a good FICO score. You say you need a credit card to rent cars, plane tickets, vacations, ect? Well i have a debt card which uses money that i have actually earned and i have been able to do all those things. As for financing a house, i dont see why you would finance 100% of the house (if i am reading this right), that is a very foolish thing to do. Put a down payment on in! And once again a FICO score isnt your only way to a good interest rate. Go and find someone who does a thing called a manual underwriting. That means they dont look at your ability to go further in debt, they look at how much money you actually have and what your financial ability is to pay off the loan.
I believe in cash only, and so far i have been able to pay for two and a half years of college with cash that i WORKED for! I dont have rich parents, but instead i believe in living within your means.
Also, way to go Jason! I also will be earning an engineering degree here shortly (Civil).
Jerry
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Thrifty Karen
Jul 7, 2008 at 12:17 pm
We have an awesome credit score, but we still didn’t get a great interest rate on our house. I was pretty ticked about it, but we’re getting ready to sell, so it doesn’t matter now. I don’t know your current financial situation, but with all the foreclosures, now might be a good time for you and your husband to seriously look at purchasing a house.
Tracee Sioux
Jul 7, 2008 at 12:30 pm
We did - bought our dream home in December.
Thrifty Karen
Jul 7, 2008 at 12:37 pm
Cool! Congratulations! We are not living in our dream home yet, but it’s a lot of square footage for the money. Our financial situation is going to change tremendously when we move. That will enable to save more for our dream home.
Tracee Sioux
Jul 7, 2008 at 1:06 pm
Dream Home = we can afford it and we have enough room.
Are you moving under happy conditions or b/c of a misfortune? or just readjusting the plan due to taking the Dave Ramsey course? Like a temporary sacrifice for the overall goal?
Thrifty Karen
Jul 7, 2008 at 1:43 pm
We are moving to a new ministry position. Once we sell our house, we’ll be completely debt free!!!!!!!!!!!!! I know the housing market is bad right now and we’d like to sell as soon as possible, but thankfully we can afford the house once we move.
Tracee Sioux
Jul 7, 2008 at 2:18 pm
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You’ll be buying again right away?
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