In the previous issue, Credit Fundamentals focused on optimal capital structures of companies and how they may effectively utilize debt to scale operations.

In this issue, I will bring the conversation back and discuss common criticisms of debt from the man himself — personal finance personality Dave Ramsey.

One of Ramsey’s “mortal enemies” in his quest for “financial freedom” is credit cards.

He does not like credit because he had an overleveraged real estate portfolio. The resulting debt caused him to declare bankruptcy.

So first off, we can see that this bad tangle with debt has soured Ramsey’s views on credit cards.

Ramsey wrote an article that details “excuses” to keep credit cards. By looking at the section about cash back and rewards, I already see some misconceptions.

“Once you add up the recurring membership fees and all the interest you end up paying, it’s just not worth it,” he wrote, but this is a false narrative.

You pay interest only if you carry a month-to-month balance on your credit card. If autopay is set up on your credit card, you will never pay interest.

Additionally, there are many credit cards with no annual fees, so no interest and no annual fee equals free points.

Let’s take a look at the JPMorgan Chase & Co.’s Sapphire Preferred card, for example. It has an annual fee of $95, but when you apply at a branch, it is waived for the first year. With a $50 annual hotel credit upon applying for the card, you are already in the green.

The card also offers a sign-up bonus of 60,000 bonus points after $4,000 in spending, which translates to about $750 in value.

Chase offers three times on cashback for travel. If all the spending is on travel, you would also earn 12,000 additional points, meaning 72,000 points in total.

If you multiply that number by the 1.25-time multiplier for travel booked with Chase, those points now have the same value of 90,000 points.

Forbes published an article that details how you can spend 80,000 bonus points. The highest value redemption is a business class flight from the East Coast to Europe.

With an estimated value of $2,500, it would take 27 full years before you go into the red. By that time, you would have used the card so much that you would likely never reach that point in your lifetime.

You cannot get the same perks and points on a debit card as you would with a credit card. As long as you are disciplined with your spending, a credit card will always serve to benefit you and not harm you. Ramsey’s advice works for a very specific subset of people and is not a one size fits all solution.

The next issue will cover some more criticisms, with the hope of showing how credit can be used responsibly.