DAVE RAMSEY: Credit card is askingfor trouble

By Dave Ramsey

Q. I want to keep one of our credit cards open and use the bill-pay option for utilities and other monthly bills. I want to do this so we can continue earning rewards points, and the way I look at it, we’d just be rerouting the money and paying it off every month. My husband doesn’t like this idea and thinks we should get rid of them all. Am I just asking for trouble by wanting to keep the rewards card open?
A. Yes, you are. Life never works out exactly the way you think it will. You can make all the well-reasoned and best-intentioned plans you want, but sooner or later that snake is going to bite you.
The only thing I’d consider in a situation like this is a debit card that has a rewards system attached. Lots of debit card programs offer the same kinds of rewards programs offered by credit card companies, with one big exception – you don’t have to go into debt.
You need to stop chasing these stupid brownie points. According to Consumer Reports, 78 percent of credit card airline miles are never redeemed. Studies also show that people spend more when using credit cards as opposed to cash. That extra money you spend on things you don’t need is money you could have been saving and investing. So, where’s the reward?
Cut up the card and close the account. You don’t build wealth by using credit cards.


Q. My wife and I are both active duty Marines. She’s planning to get out in a few months, but I’m staying in for the long haul. You recommend saving 15 percent for retirement, but how does that apply in my case when I’ll be getting a good pension after 20 years?
A. I’d like to see you do both. Just imagine the money you guys would have for retirement with your military pension and a big pile of cash from having saved 15 percent of your income over the years.
Having options is a great thing. Think about all the things you could do down the road if you save for retirement and have your pension in place. You could pay cash for a home, or even open a business when you retire from the military. And these are things you probably wouldn’t be able to do working with just your service pension.
You’ve got a great future if you’ll just keep plugging along and saving. Let the military do its thing, and you guys keep pumping 15 percent of your income into Roth IRAs and other pretax retirement plans. It’s going to be pretty cool.
For more financial help, visit daveramsey.com.