I really like Dave Ramsey.  His programs for dealing with debt and entrepreneurial leadership are outstanding.  But I think Dave’s wrong on the use of credit cards.  He preaches total abstinence.   He treats them like crack cocaine.  Don’t get started because you’ll get hooked.   And, part of his message I agree with.   Credit cards can be dangerous.  And, even more, they’re often a product of big banks, which are the bad guys.  However, for people who are disciplined enough to pay off their balance monthly, credit cards offer great benefits and their reward programs can be lucrative.    And business owners who utilize a disciplined use of credit cards and their reward programs can benefit substantially.Creditcards

In his attack on credit card rewards program, Ramsey does get specific.  He cites annual fees, expiration dates and limits on cash back as negatives.  So, let’s look at each of these claims:

Annual Fees:   When I weigh the benefits received from cash back and point purchases, the fee isn’t painful at all.   The only card with a major annual fee is American Express.   All the other programs are fee-free or feature a very low fee.  Back to American Express, even though their Platinum membership is several hundred dollars, it does come with some solid perks, including at one point, membership in airline clubs, which is a valuable for business travelers.   Since I’m not on the road much these days, I no longer use AMEX.    However, if that situation changes, I’d renew my platinum card immediately.

Expiration Dates:   Yes, points do expire at some point.  This is probably a result of corporate accounting not wanting companies to have a liability on their books indefinitely.   Nevertheless, I’ve never had an issue with expiration on any of my reward points.  Never.

Cash Back Limits:  While some cards do put a cap on cash back rewards, I’ve never encountered it.  And, on one of my business accounts, I get cash back every month.

For small business, credit card reward programs can offer a number of advantages.   Not only are the points valuable for cash purchases or paying for business travel, they help to offset the cost of accepting credit card payments from customers. Additionally, and probably the best benefit of disciplined credit card use, you have leverage when using a card.  When a product or service isn’t delivered as contracted, the credit card charges can be reversed.

So, like Dave, I think credit cards can be very destructive.  And certain people would be wise not to use them, ever.   But Ramsey’s suggestion that everyone simply cut up their credit cards is short-sighted.   Fire, guns, chainsaws, cars and even the internet are all tools that can greatly enhance life but require the user to exercise good judgement.   My doctor, who is full of common sense one-liners, often reminds me that the only difference between medicine and poison is dosage.  Take your medicine as directed and you get better.  Take too much and you can die.  If you’re responsible and disciplined, credit cards offer a number of important benefits, including generous rewards programs that do pay consumers who pay their bills.

Pete Thomson

The Consumer Team

Editor’s Note:  Pete Thomson is host of The Consumer Team, broadcast weekly on CBS Radio’s 1080 KRLD in Dallas/Ft. Worth, Texas.  (Saturday, 5-7 PM Central)   Thomson is also CEO of McQ Media Inc, a media company based in Dallas, TX,