There are a few market research studies out there that show that even if the credit card is paid off in full at the end of the month, overall spending is up to 17% higher when using credit instead of cash. It has nothing to do with interest rates and everything to do with psychology and having opportunity cost slap you in the face with EVERY purchase, right at the register. People who follow your advice deal with opportunity cost up to a month (or even a year in the case of "1 year no payments") later, diluting its effect on spending habits. People who must confront the opportunity cost ramifications at the time of purchase are far less likely to spend that extra little bit, even when they can afford to. 17% is not chump change, but that's the average spending impact even with people who have the discipline and income to pay off their credit cards at the end of each month and don't carry a balance.
There's also an opportunity cost in not using other people's money. If the simple use of credit causes you to spend 17% more that you would have otherwise then you shouldn't use credit. For a fiscally responsible individual the use of no interest and rewards credit can provide at least modest gains.
Credit companies don't really care if the consumer spends more or if they don't (if they do that's a bonus for them), they make their money by charging the retailer every time you make a purchase on credit. A 17% increase in purchases is miniscule on a net margin basis in comparison to the charges to the retailer.
If you want to be rich, act like rich people. They're not financing their cars or computers just because of a low interest rate or deferred payment, and those rich people didn't do that before they were rich either.
Most rich people aren't using credit to make nominal purchases yet it doesn't mean they don't use credit. The scales are just different. They use other people's money all the time. Normally the people they borrow from are called "shareholders" or "bondholders" and a great many of them got rich by leveraging their businesses.
Well, there is one other exception to cash only... If you can't keep food on the table or the power/water on in the house, you do what you gotta do including feeding the kids on credit and just not paying off the CC until you figure something out or increase income or sell everything non-essential, move to a cheaper place, etc etc. But someone feeding their kids on credit probably shouldn't own any car but a $500 beater, shouldn't own a TV or smartphone, shouldn't have cable tv service, etc. Lots of "essentials" really aren't, and those should be ditched long before it gets to that point.
OK, this one takes the cake as the worst financial "advice" I've ever heard. I agree with sell everything and spend nothing on anything non essential but you'de actually
encourage a poor person to dig themselves into a hole they're likely never to be able to get out of? Most people, regardless of social status have friends and family. There are social programs designed to keep people from starving. There are many other options and most people in that situation won't be eligable for credit to begin with.
Finally, I'm familiar with Dave Ramsey. While I'm sure he's helped thousands to get out of and control debt I wouldn't qualify that as a "trusted financial advisor" unless I'm simply unfamiliar with his work in helping people accumulate and structure assets, minimize taxes, protect income, finance businesses, protect families and possesions, protect assets in old age, establish an estate plan and the many many other things that "trusted financial advisors" do.
I'm sure you're a smart guy but I'm also sure you're not an expert in personal or business finance based on your prolific posts here. Perhaps you should concentrate on your areas of expertise and put your MBA to better use.
