"Why Can't I Use My Credit Card If I Pay It Off Every Month?"

Summary

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Episode Overview

Main Theme:
This episode of The Ramsey Show Highlights tackles a classic listener question: “Why can’t I use my credit card if I pay it off every month?” The hosts discuss the rationale behind their anti-credit card stance, even for disciplined, debt-free users seeking rewards, and examine the deeper behavioral, ethical, and societal effects of credit card usage.

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Key Discussion Points & Insights

1. Listener’s Credit Card Habits and Question

• Miguel (Caller) shares that after recovering from bankruptcy early in life, he has used credit cards responsibly for over a decade, always paying them off monthly.
• Purpose: He primarily uses cards for the rewards, particularly free family travel.
• Miguel’s Question:
  “Would you still recommend that I don't do that? If so, why? Or is it okay for me to continue using my credit cards as long as I pay them off?” (00:45)

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2. The Case Against Credit Card Rewards

a) The True Value of Rewards

• Host (A, presumed George Kamel): Challenges Miguel to calculate whether the “free” rewards are really worth it, considering annual fees and total spending.

• Notable Quote:
  "So, Miguel, the truth is you could have saved up four grand out of a few hundred grand that slipped through your hands. Am I wrong?" (02:47)

• Analysis: The hosts caution that the significant amount spent may not justify the rewards. (e.g., spending hundreds of thousands to earn $4,000 in flights is a poor trade-off.)

b) Behavioral Economics: Emotional Disconnect Leads to Overspending

• Rachel Cruze (C): Explains research showing that people spend more on credit cards than with cash or debit, even when paying them off each month.

• Notable Quote:
  "Studies have been done and it has been proven mathematically that you do actually end up spending more when you're spending it with a credit card... because there is zero emotional connection to your money, subconsciously, naturally, without you even realizing it, you end up spending more." (03:36)

• Experiments & Testimonials: Refers to listeners who spent less when switching off cards:
  "We have heard countless times...people say, actually we ended up going without a credit card for six months... and we actually ended up spending less." (03:55)

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3. The Moral and Societal Argument

• Rachel Cruze raises the issue of how credit card companies profit from those who can't pay in full—thus, even “responsible” users benefit from others’ hardship.
• Notable Quote:
  "The people that are hurting... are the ones paying the fees, they're the ones paying the interest, they're the ones making the bank rich to get people like you to get free points and free flights. So the—I mean, it kind of feels like off the backs of people who are struggling and hurting. I don't want a free flight out of that." (04:45)
• Personal conviction: Rachel prefers to save and budget, avoiding credit altogether—“There’s just something so freeing about it… I don’t want it. I don’t want it.” (05:52–06:08)

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4. The Invitation to Self-Experiment

• Host (A, George): Suggests Miguel try using only debit for a year, see how much he saves by avoiding unconscious overspending—implying the “rewards” may pale in comparison to actual savings.

• Illustrative Example:
  "Let's say you spent $200,000 to get [back] 4 [$4,000 in rewards], that's 2% cash back. Use your debit card for a year and see if you spent $190,000 instead of $200[000]. Well, that just saved you $10,000 in rewards by not spending more." (06:26)

• Book Offer: Host offers a copy of his book Breaking Free from Broke, inviting Miguel to dig deeper and call back. (06:54)

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5. Lighthearted Banter and Closing

• The hosts express affection for Miguel’s earnest debate, “Rachel was laughing. Because you don't agree,” (07:14) keeping the tone friendly and honest.
• Miguel concedes a key point: “Especially with the part that, you know, there's. You know, you don't feel the money coming out of you, you know, when you're using a credit card.” (07:21)
• The conversation wraps up with encouragement for Miguel to revisit his approach and an offer of further resources.

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Notable Quotes & Timestamps

• Miguel:
  “If I pay off my credit cards at the end of the month and I am using them a lot so that I can get, like, you know, free tickets to travel... Is it okay for me to continue using my credit cards as long as I pay them off?” (00:45)

• Host/George Kamel:
  "So, Miguel, the truth is you could have saved up four grand out of a few hundred grand that slipped through your hands. Am I wrong?" (02:47)
  "Use your debit card for a year and see if you spent $190 grand instead of $200. Well, that just saved you $10,000 in rewards by not spending more." (06:26)

• Rachel Cruze:
  “You do actually end up spending more when you’re spending it with a credit card... because there is zero emotional connection to your money, subconsciously, naturally, without you even realizing it, you end up spending more.” (03:36)
  “It kind of feels like off the backs of people who are struggling and hurting. I don’t want a free flight out of that.” (04:45)
  “There's just something so freeing about it. And again, that may not be everyone's conviction, but...I will budget for that like all day, every day and I don't have to worry about it.” (05:52)

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Important Segments & Timestamps

• [00:45] Miguel’s question on responsible credit card use
• [02:47] Calculating true reward value
• [03:36] Rachel Cruze on behavioral spending & emotional disconnect
• [04:45–05:52] Rachel’s moral argument and personal philosophy
• [06:26] Debit card experiment suggestion
• [06:54] Book offer and closing thoughts

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Summary

In this episode, The Ramsey Show Highlights addresses the popular strategy of paying off credit cards monthly to chase rewards. The hosts commend responsible payment but caution that the system is deceptive on both a financial and emotional level. They argue that even well-disciplined users tend to overspend and that rewards pale in comparison to potential savings. Furthermore, they raise an ethical point: benefiting from rewards that are underwritten by less fortunate users’ fees and interest. The hosts end with actionable advice—try using only debit for a year—and invite listeners to reflect on their own motivations and habits.

Tone: Friendly, direct, and with a characteristic blend of humor and tough love.

Transcript

[A]

Brought to you by the EveryDollar app. Start budgeting for free today.

[B]

I listen to Dave say all the time how credit cards are the devil and they are the worst thing that one person can use. And I agree with all of that, except. So, a really long time ago, kind of like Dave, at a very young age, I did bankruptcy. And since then, I learned to live within my means. So I've. But I've had a lot of credit cards since then. I just paid them off at the end of the month. I don't have any credit card debt I haven't had for over 10, 15 years now.

[A]

Good.

[B]

So my question is, you know, if I pay off my credit cards at the end of the month and I am using them a lot so that I can get, like, you know, free tickets to travel with my family and stuff like that, would you still recommend that I don't do that? If so, why? Or is it okay for me to continue using my credit cards as long as I pay them off?

[A]

Well, as of this recording, it's still a free country, so you are free to do as you wish, Miguel. And so is it okay? Sure, if it's working for you, go for it. But the reason you called in, there's something inside of you that maybe is thinking, is there a better way? Could I be doing better? Could I optimize if I use my own money instead of using someone else's and paying it back every month later on? Sure. You could make the argument in hypotheticals all day long, but the real thing here is you're using it to get free travel. Correct? Did I hear that right?

[B]

Yeah, correct.

[A]

And so have you actually added up what it would have cost you if you had paid cash, done your own research, found the right flights that work for your family? Like, okay, I got. I got $600 in value out of this, and it cost me 200 for the card for the year. Have you done the math on that?

[B]

Yeah, I mean, it definitely pays off. Like, for example, last year I took my family to Europe, and it. I completely paid for our flight tickets. It was $4,000 worth, just with points. I had to pay a little bit.

[A]

How much did you spend? Oh, you said you had to pay it off the balance the next month.

[B]

No, no, that. That was just paid off with points.

[A]

Okay, you said you owed a little bit still for the flights is what you meant.

[B]

Okay, well, yeah, they make you pay, like, some taxes, but it was like $200 or something like that.

[A]

And then how much did you have to spend in order to earn that many rewards, that many points. This sounds like it was a few years of spending.

[B]

Yeah, I haven't done the math, but it's probably a couple hundred grand or something like that.

[A]

There we go. Ding, ding, ding. So. So, Miguel, the truth is you could have saved up four grand out of a few hundred grand that slipped through your hands. Am I wrong?

[B]

Well, okay, so here's the thing. I use my credit cards for everything. Yeah. I pay my bills. I pay, you know, everything that doesn't charge me a fee for using a credit card.

[A]

Yeah, a lot of those bills will charge you 3, 4% for just running that credit card.

[B]

Charge me. If they charge me even a penny, I won't use my credit card. So I don't pay my mortgage or anything like that with my credit cards. But there are actually a lot of things that I can with my credit card. I do my groceries with my credit card, all of my regular spending. And that adds up to quite a bit. You know, throughout the years, you've impressed Rachel.

[A]

Rachel, if you could see her face, she is so impressed. No, she's not.

[C]

I'm just saying. Well, here's the thing, Miguel. A couple of things. Number one, sure, studies have been done and it has been proven mathematically that you do actually end up spending more when you're spending it with a credit card. And it may just be groceries and all the things, but because there is zero emotional connection to your money, subconsciously, naturally, without you even realizing it, you end up spending more. So even with groceries. For instance, we've talked to people on the show and they say, oh, I just would use my credit card for the things that we needed. You know, the bills and groceries and gas. And then we have heard countless times, haven't we, George? People say, actually we ended up going without a credit card for six months to see if we could save money, and we actually ended up spending less. We don't even know how that happened. And I'm like, well. Cause I know, because there's no emotional. So you don't even realize the amount of money that you're actually overspending. So over years of spending hundreds of thousands of dollars on this credit card to get $4,000 of flights, what could have been saved actually may have been even more than 4,000 with the subconscious spending that you're doing and not even realizing it. So that's one thing. And then number two, Miguel, like. And again, this is a personal kind of conviction for me, and it may not be for you. I'm not saying it has to be for everyone, but what's so frustrating to me, and I think because we're in this line of work and Geor and I talk to people every single day who do have credit card debt. And these banks and this whole debt industry has screwed over the American people. They have. They have not helped people, they have hurt people. That's why we have a job. And because of that, the people that are hurting, the single moms that are calling in that have $11,000 in credit card debt and they're trying to get out, or it's the families who lost. Like people that are struggling and they are in credit card debt and they're the ones paying the fees, they're the ones paying the interest. They're the ones making the bank rich to get people like you to get free points and free flights. So the. I mean, it kind of feels like off the backs of people who are struggling and hurting. I don't want a free flight out of that. I have the ability to save up and work hard myself and not have to deal with this industry at all. And there's. And I have no bill at the end of the month. You know what I mean? Like, I pay for my groceries sometimes I do instacart and have them delivered and then it's done. And then I'm done. And I'm like, I don't have to. I don't have to play this game with them. And. And so there's just something so freeing about it. And again, that may not be everyone's conviction, but when I see mass. I see banks and I see their bill, all the things too much like, this is great. And I'm just like, man, they have. Y' all have screwed over people. And people are giving their hard earned income to these places, to these industries and they're not allowing to be able to help themselves, you know. And so I'm like, I don't. I don't want it. I don't want it. I will save up. I'm. I'm booking a girls trip actually today. I was telling George I was gonna buy some tickets and I'm like, I will go on Southwest and buy my. I think it's $196 one way, you know, to get. And I'm like, I will budget for that like all day, every day and I don't have to worry about it. So there. I don't know, Miguel. It's.

[A]

Here's the experiment. This is fun. So let's say you spent $200,000 to get 4, right? That's 2% cash back. Fair. Here's the experiment. Use your debit card for a year and see if you spent 190 grand instead of 200. Well, that just saved you 10 grand. So you just gave yourself $10,000 in rewards by not spending more. So that's. That's the thing that I can't help you figure out on paper. That's something that you need to explore for yourself. And again, there's the moral side. I cover eight objections of why people won't stop using their cards in my book, Breaking Free from Broke. So how about this? I'll send you a copy, you read the chapter, and then call me back for a fun discussion.

[B]

Yeah, no, look. And I totally agree with you guys as far as. Hello?

[C]

I was gonna say. No, you don't, Miguel.

[A]

Rachel was laughing. Because you don't agree.

[C]

You don't agree. You're charging those credit cards up.

[B]

It's fine.

[C]

We love you. We are great. We're great.

[B]

Especially with the part that, you know, there's. You know, you don't feel the money coming out of you, you know, when you're using a credit card. So my question is, I wish we.

[A]

Had time for more. Miguel, you. You burnt out the clock telling us about all the rewards you got going to Europe, my friend. But, hey, call us back and hang on the line. I'll send you a copy of Breaking Free from Broken. I think it will enlighten you. With all the stats, create your free every dollar budget today. The simplest way to budget for your life.