Dave Ramsey’s best advice for ditching your credit card while debt is at record levels

An anxious couple looking at bills, with a laptop and credit card on the table.

Image source: Getty Images

With the skyrocketing rate of inflation, consumers have taken on more and more credit card debt in order to get by. America’s credit card debt totaled $930 billion in the third quarter of this year, the highest amount since 2019. That debt is also becoming much more expensive, with interest rates rising. Just hit a record.

Dave Ramsey’s solution is simple – get rid of your credit cards. Although this is an extreme measure, it is true that being dependent on your credit card and debt will cost you. To avoid that, here’s Ramsay’s best advice about credit cards and credit card debt.

Find out: This card has one of the longest 0% interest periods

More: Consolidate debt with one of these top-rated balance transfer credit cards

How to pay off credit card debt

Lots of people call in to Ramsey’s radio show to help pay off credit card debt. This is how he usually recommends:

  • Cut out all your non-essential expenses to free up as much money as possible.
  • List your debts from smallest to largest.
  • Make minimal payments on all of your accounts to keep them up to date.
  • Put the rest of your money into the account with the smallest balance.
  • Once you’ve paid off the account with the smallest balance, move to the next smallest balance, and so on.

This debt repayment strategy is known as The debt snowball method. The reason it works so well is that it motivates you. When you attack your smallest balances first, you pay off accounts more quickly. Every time you pay off an account, you see a clear progression in your debt, which is good motivation to keep going.

Personal finance is 80% behavior and 20% knowledge

This is a tip Ramsay repeats often, especially to callers with credit card debt. Financial knowledge only goes so far. What really determines your success with money is your attitude.

Suppose you try it Get out of credit card debt. As you saw above, none of the steps involved are complicated or require much financial knowledge. It’s a matter of cutting back on your spending and putting as much as possible on your credit cards. If you can build these habits and stick to them consistently, you will eventually be debt free.

Have an emergency fund

Emergency expenses are often the reason people end up with credit card balances that they can’t pay off. Like most financial experts, Ramsey recommends putting money into a file emergency fund. This way, you won’t have to go into debt if an unexpected bill comes up.

Ramsey’s advice is to have an emergency fund that will cover three to six months of living expenses. However, saving that much money can take time. In his financial plan, he says to start by saving $1,000 for a starting emergency fund. Once you pay off all of your debts, except for mortgage debt, you can focus on having a fully funded emergency saving account.

Do not borrow money to pay for your living expenses

With the cost of living on the rise, many have had difficulty making ends meet. Putting your living expenses on your credit cards might seem like a solution, but it’s one that Ramsey believes you should avoid at all costs.

In his words, this is “a temporary solution that creates a permanent problem.” Although it covers your expenses for the time being, accruing interest charges will likely put you in a more difficult financial position.

Ramsay stresses that your income should cover your living expenses. If that doesn’t happen, he recommends cutting costs by any means necessary, whether that means cutting your food budget or moving to cheaper territory. The other option would be to choose a file Side hustle To earn some extra money.

Credit card debt is a serious problem that can cost you a lot of money. Ramsey offers some good advice on how to avoid credit card debt, or get out of it if you have card balances to pay off. His recommendation for your abandonment credit cards They are not strictly necessary for everyone, as they can be a useful financial tool if you pay them in full each month. But with interest rates so high, debt avoidance should definitely be your first priority.

The highest interest-eliminating credit card through 2024

If you have credit card debt, transfer it to This top balance transfer card Secures you with 0% intro APR for up to 21 months! In addition, you will not pay any annual fees. These are just a few of the reasons why our experts rate this card as a top pick to help get your debt under control. Read our full review Free and apply in just 2 minutes.

We firmly believe in the golden rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by the covered advertisers. Ascent does not cover all offers on the market. The editorial content of The Ascent is separate from the editorial content of The Motley Fool and is created by a different team of analysts. Disclosure policy.

The views and opinions expressed herein are those of the author and do not necessarily reflect the views and opinions of Nasdaq, Inc.

Leave a Comment