Dave Ramsey says: Despite rewards, credit cards make you spend more

Dear Dave,

I don’t understand why you don’t like it when people properly manage their credit cards and pay them off every month. By doing this, you pay no interest and in my case I even got a free trip to Europe from using my credit card. Please explain.

— Patrick

Dear Patrick,

I truly doubt that I can explain it to your satisfaction, but here goes. First, the credit card company did not give you a free trip to Europe. They’re not going to lose money on transaction after transaction, year after year.

The fallacy is that you feel like you’ve outsmarted a multi-billion dollar company that studies human behavior at incredible levels. You maybe, possibly came out ahead against them during that particular calendar year, but even that’s debatable.

Over the course of your life, you’ll spend more when using credit cards as opposed to cash. There’s plenty of research proving this to be fact. If you use a credit card repeatedly with the idea that you’re getting a free trip to Europe because you’re building up your miles, you spend more.

An example would be McDonald’s: When they started taking credit cards years ago, they found that the people using them spent 47 percent more.

In a good way, you are very unusual. You’re not playing over in the stupid zone like most people who use credit cards. But both I and the credit card companies have found that, on average, your behavior would put you in a class of less than one-half of one percent of their customers.

Can 0.5 percent of people handling snakes manage not to get bitten? Sure. But that doesn’t mean I’m going to start recommending snakes!

— Dave Ramsey

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