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My name is Joshua. I am your host, and today we do a live Q&A on the topic of credit cards. This next week on Monday, I'm launching a new course called How to Borrow Money Safely and Never Pay Interest Using Credit Cards. So, thought it'd be fun. Let's just talk about credit cards.

There are probably few conversations in public personal finance discussion that are as heated and as opinionated as credit cards. People have some strong feelings about them, and I think that's reasonable, because many of our lives have been dramatically impacted by credit cards. A lot of us have been deeply in credit card debt, and to get out of it was the subject of many months, if not years, of hard work.

Some of us have used credit cards to great effect, and those credit cards have been a real opportunity. It allowed us to start new businesses and take care of problems that we otherwise wouldn't have been able to take care of. But I thought it'd be fun to do a Q&A entirely focused on credit cards.

So, I opened the phone lines for today. They're open to any listener. I put out an announcement in the podcast feed there on your phone. And so, the phone lines are open to any listener today who had a question related to credit cards. We begin with Curtis in Washington.

Welcome, Curtis. How can I serve you today, sir? Thanks, Joshua, for taking my call. My wife and I, we have about 10 credit cards in total, but primarily use three of them on an everyday basis. We don't carry any balances on any of them, and we auto-pay each credit card on time every month.

And as a result, we have a FICO score of over 800. I want to cancel five of them that we don't really use, but they do have some of the longest track record of credit history. Primarily, I just want to reduce our exposure for potential fraud, simplify our credit card portfolio, and eliminate paying annual fees on three of them, which total about $225 per year.

We're planning to purchase two to four investment rental properties over the next 24 months and likely going to use financing through fixed rate 15 or 30-year mortgage products. Then we'll pay additional principal over time to pay them off in 10 years, so hopefully we can cash flow and become financially independent in 10 years.

But my question to you relative to credit cards is, should we wait to cancel these credit cards after we finance these investment rental properties so it doesn't negatively impact our credit score and to compromise potential financing terms? I just don't want to keep paying annual fees on cards that we don't really use, but I know we've had them for a while, so they are a large contributing factor to our credit score.

But if we have to keep paying the $225 a year in total for the fees, is it worth it just to get the better interest rates? I just want to get your thoughts on that, Joshua. Good question. So let's start with the biggest impact here. The biggest impact if you were to cancel these cards will be to the length of your credit history.

So in calculating the length of the credit history, part of what's important is the total length as far as what your oldest cards are, and then part of what's important is what your average age of your credit is. Now, the length of your credit history makes up only 15% of your score, so compared to the other factors, again, there are five factors that go into your FICO score, 35% of it is made up by your payment history, how effective and consistent you are at paying your bills on time.

By what you've described here, you have them all set up on auto pay, you are current on everything, that's good. So that's contributing massively to your credit score. The second factor is the amount that you owe. This makes up 30% of your credit score. And this has to do with a ratio of how much you owe versus how much credit available that you have.

So, as I said, you have no money owed, no balances on your cards, so that means you have a very low utilization ratio, it's zero, which is excellent. So that's also making a huge difference to your score. Now, those two factors together make up 65%, so they account for the bulk of your credit score.

The other three factors are length of credit history, which we'll come back to in a moment, that's 15%. Next is credit mix in use, that's 10% of your score. That has to do with what types of credit you have, how much in revolving debt versus installment payments, things like that.

And then 10% of your history has to do with applications for new credit. So you have not applied recently for new credit, so probably you haven't, so that's also of a minor impact for you. So, first, in light of your credit score, of your overall credit score, this is not going to be a hugely significant impact on your credit score one way or the other.

Because the total possible metric that could impact your FICO score, it's only 15% maximum, that has to do with your length of credit history. Now, if you were to choose to close your cards, here's what would happen. That will impact, if you close, especially if you close some of the older ones, that will impact the total age of your cards, and it will also impact the average age of your cards.

So what you should look at is you should try to get a sense by looking at your credit report or your history with each of these cards, what your average age of the cards is. You could make a simple spreadsheet. You could put your 10 cards into a spreadsheet.

You could put the number of months by checking your credit report. You could put, and seeing how long you've had those cards, unless, again, you have that history in your own records. You could make a simple spreadsheet with 10 different entries and then the number of months that you've had each of the cards.

And you could get a sense by averaging those numbers of months, you could get a sense of how old your average age of credit history is. Then what you would do after you create that spreadsheet is you play around with deleting some of these cards from the age of your credit history.

So once you cancel them, they will go out of, they will be removed from the factors of your credit history, and you can kind of get a sense of that by doing this yourself. So I would start by doing that, and I would try to figure out, will these three cards, and I'm most concerned about the ones that have annual fees because that is actually a cost.

Let me go back to your reasons for closing. You stated that you have three reasons for considering closing. Number one was risk of fraud. Number two was your concern about your overall, what did you say, your credit card portfolio, I believe you said. And then the third one-- I just want to simplify it, yeah.

Right, simplify. And then the third one has to do with your annual fees. Well, of those three, the only ones that I think are significant is the annual fees because that incurs a cost for you. I don't see any risk that you have from the perspective of fraud. If you physically know where each of your cards happen to be and you physically have control of those cards, you are not liable for any fraudulent charges or transactions on those cards.

So your only risk with those cards would be if somehow somebody were to charge something fraudulently and then perhaps you didn't pay it. You didn't pay the minimum payment. Well, if you have them set up with an automatic minimum payment, as it sounds like you do, which is my recommendation, I recommend that every credit card you have is always set up with an automatic minimum payment that is initiated by your credit card company to one of your bank accounts.

If you have that set up, then there is essentially no risk. So you don't even have to look at the statements every month. If you notice a payment going out to a credit card, then that's the time you go and look at it. If it's a fraudulent transaction, you challenge that fraudulent transaction and you can get that cleared.

So I'm not concerned about fraud. I don't see any risk to you with regard to fraud. If you're concerned about people using your credit information to open new accounts, you can solve that by implementing a credit freeze on your credit file. With regard to simplifying your credit card portfolio, I don't really see any benefit to this.

If you just have it set up, it's not a big problem to have an additional credit card account that if you have an organized system for maintaining what your username is and your password and all of those things, it's relatively simple to have that. And especially because you are going to be applying for financing, I would be careful and concerned about doing anything at this point that could impact the financing.

The thing that does concern me is the annual fees. So back to your spreadsheet. If you put each of these 10 things into a spreadsheet, then you delete those 3 that have annual fees, you can get a sense of how that will impact your overall credit, average credit, age of credit.

If your 3 cards that have fees are fairly new, let's say that you've had 5 of your cards for 10 years and then you have 3 of them, 2 of them for 5 years, and these 3 that have fees are ones that you applied for last year to get some bonus point program, but now you don't really want to pay the fees this year, then deleting them or canceling them prior to the renewal date wouldn't harm your average credit much.

In fact, who knows, maybe it would make it go up. If, however, these 3 are old cards that you've had for a long time and then the rest of your portfolio is fairly new cards that you've only had for a year or 2, then these 3 cards could make a dramatic impact in the average age of your credit.

If that were the case, I would not cancel them or I'd be very slow to cancel them or I'd be very careful about canceling them. So the only other impact that you would have, that's the most important impact to your situation, and that would have to do, again, with your average age of credit.

The other impact would be your overall amount of credit available to you. So if you had any idea or plans to use these cards in the future, for example, let's say that in your overall real estate planning, you're looking at this and you're saying, "I'm going to apply for traditional mortgages and I want to make sure that I have that locked in, but I might have to rehab these houses that I'm going to buy.

And in doing that rehab, I'm going to use credit cards as a source of financing. I have cash, but I might use credit cards." Well, in that case, if you ever think that you might carry balances, then one of your big risks here is lowering the total amount of credit available to you.

And that's the other thing that I would put into my spreadsheet. I would try to get a sense of what is your available credit on these three cards that have fees and think about whether or not you might want to have that available credit in the future. The most important thing here is to always, whenever possible, have way, way, way, way more available credit to you versus any balance you would ever possibly carry, because that will keep your credit score extremely high and keep financing options available to you, even if you had a small balance.

So let's say that you said, "I think in the future I might need to have $10,000 of debt while I rehab this property," or whatever your purposes are for this debt. If you have a total of $11,000 available credit across all of your five cards and you owe $10,000 across your five cards, your credit score will plummet because your utilization ratio will be extremely high, and that utilization ratio accounts for 30% of your credit score.

If, on the other hand, you have a total of $100,000 available to you in available credit across your credit card portfolio, and you have the same $10,000 amount that you owe, you will continue to maintain your very high credit score because your utilization ratio in that case would only be about 10%.

And from memory here, I think the best tier is under 14% of your total available credit available to you. So in general, that's why it's a bad plan to lower credit that's available to you, because if you ever did carry a balance, if you ever did use it for financing in the future, then you want to have the maximum possible amount available to you.

In general, remember that your credit score has nothing to do—it's an artificial formula that in real life is fairly predictive of who's a good borrower and who's not. But like any formula, you can manipulate it for your own ends. So your credit score doesn't say anything about your ability to pay back a debt.

It only simply says the percentage of debt that you owe versus what's available to you. So finally, back to your actual properties. I would investigate the available age of the debts. I would investigate the total amount that this would impact my total credit available. And then what I would do if I were in your shoes is I would make an application with all of the credit cards that you don't want to cancel to see if they will raise your available balance—excuse me, your available credit.

Because sometimes what you can do is apply for an increase in your available credit. And then the credit card issuer will come back and say, "No, you have too much." And you'll say to them, "Well, what if I cancel this other card?" And they'll say, "Sure, go ahead." Or the same thing can happen sometimes when you go to apply for mortgage financing.

They say you have too much available credit. You say, "Well, what if I lower my available credit?" In which case, that satisfies the model for the lender, and they can go ahead and approve it. If you can apply and get additional available credit, especially even additional available credit on some of your older cards—of course, that's not going to impact the age.

But just to have that available, then that gives you more freedom and flexibility to cancel these newer cards. Does that make sense? It does. It does make a lot of sense. Thanks, Joshua. Yeah. I would not risk financing on three or four properties over a mere $200. But my guess would be—so if you actually have property in mind, etc.—but if you have no reason to keep these cards with the annual fees around, as long as they're fairly new and not fairly old, and as long as they're a fairly small percentage of your credit, then I think you can go ahead and cancel them.

Any other questions before I go on to the next caller? No, that's all. Thank you very much. Thanks for calling in, Curtis. Congratulations on your success, and I hope you are able to continue to build. Steve in California, welcome to the show. How can I serve you today, sir?

Hey, Josh. Yeah, calling in about a credit card that I have. It's actually a business credit card that I've been using improperly for many years for my business. And I just kind of realized that I was doing it wrong. And so now I'm looking to get that thing paid down a little quicker.

Basically, what was happening is I was carrying a balance. And I was under the wrong assumption that if I paid whatever I charged on the card each month, I would only be paying interest on the balance and not the new charges. And then someone said, "Yeah, actually, you have to pay interest from the day you charge something on it if you have a balance." Right.

So that was a learning lesson for me because I didn't realize that. So now I'm trying to get it paid down. But my question is should I move this over to a balance transfer card and then try to get it paid off within a year with the 0% APR?

Or should I just keep it where it's at now? I think it's like 17% interest or something and just kind of try to drive it down as quick as I can. How's your credit score? 731. Okay. So with a 731 credit score, you should have plenty of options available to you.

How many credit cards – when you say this is a business credit card, I understand that you are using it for business. But has it been issued under your personal Social Security number and your personal credit profile? No, it doesn't show up on my credit at all. Interesting. Is your business rather small, meaning that you – Yeah.

All right. So in that case – Yeah, it's just a LLC sole proprietor. Okay. And about how much – was the balance again? I neglected to write down the number. It's like $21,000. Okay. And if you focus your attention on paying this off, how long do you guess it will take you to pay it off?

It would be $500 a month. So it would probably take a while. Got it. So in looking at this, I would say there are a couple different answers to your question. And I think of it in terms of a tiered decision-making process. First, if we simplify the question to this, "I owe money.

And as I'm paying down the debt, should I borrow at the lowest possible terms?" The answer to that question is always yes. Correct? Right. So if you could move this debt from a $21,000 debt that you're paying 17% interest on to a $21,000 debt that you're paying 6% or 0% interest on, that would be a good move.

Agreed? Yeah, because I'm – like 300 or 400 of that every month is my interest. Right, right. It's significant. And this would also help you even to lower your minimum payments because the way that credit card minimum payments work, very simply, your monthly minimum payment is equal to 1% of your balance plus any new interest charges, fees, etc.

So if you figure that on a $21,000 debt, you have a 17% interest rate, that's $3,570 per year, and you divide that by 12, that comes out to $297.50 per month. So your minimum payment will be equal to, simplistically, $297 plus 1% of the $21,000, which is $210. So you add those numbers together and you get a total of $507, which is your monthly minimum payment.

Is that about correct? Yep. Now, what you could do – so if you could refinance this debt and you could move it from a 17% interest payment to a 0% interest payment, then that right there would save you $297 per month. It would save you the monthly interest cost.

Agreed? Yeah. So now, if you could continue paying the $500 per month, it would substantially improve that you would be paying double, at least double what you're actually paying right now if you're just making the minimum payments. So lowering the interest rate is always a good idea, and it's especially a good idea while you are in the middle of this because it can lower your minimum payment, which can free up cash flow.

Removing that $300 interest payment can make a big difference in your overall cash flow, your ability to set aside money, and your ability to pay off debt. So that's why it's such a big deal that most people carefully calculate their numbers so that they can move it to a lower interest rate.

Now, the second thing to consider is liability. Now, because you said this credit card is actually issued in the name of your business, then you now have a decision to make. Do you want to move this over to your personal credit report, or do you want to keep it on the business credit report?

You said you are an LLC filing as an S-corp, did you say? LLC, full proprietor. Okay. So as an LLC sole proprietor, it's my understanding of how you would report this business interest. It's my understanding that it doesn't matter whether this credit card is issued in the name of a business or in your own personal name.

That's my understanding. Verify with your own tax professional. Yeah, it's just a pass-through. Yeah. So any debt that is associated with business expenses is deductible debt. Any debt that is associated with personal expenses is non-deductible debt. So now you have a tax question and a liability question that you have to answer.

Let's deal with the tax question. One of the things you want to be careful of is you want to be careful not to incur personal debt that you're paying interest on in your personal life because now that becomes non-deductible. So one of the strategies that I have frequently recommended to people, if you have a credit card balance and you sit down and you're trying to figure out how do I make sure that I pay this off, one thing that many people could do is just take out a new credit card that offers a 0% introductory rate on purchases.

And a very effective way of paying off another credit card and effectively refinancing it is you apply for a new card that offers a 0% introductory purchase period on it and you use that new card to pay for your groceries. You use that new card to pay for your gas and for any other personal expenses.

And you take all the money that you were spending on those normal expenses in your life and you put it towards the high interest rate debt. Those 0% introductory purchase period cards are the easiest ones to get. And so that's a very effective strategy for many people. But here you face a problem because if you aren't able to pay down that new card that's been issued in your personal name and if you're not able to keep it at a low rate and you start to incur interest expenses, now you will lose the legal deductibility of your interest.

Because instead of saying, "Look, these expenses were for business and the interest is thus a business related debt," now it's clear that your groceries and your gas are related to your personal expenses. So this is something you have to be very careful of. Agreed? Yeah, I mean, basically like co-mingling of funds kind of.

Exactly. Making it harder for me to write off that interest every month. Exactly. So you want to keep it separated. And this is a challenge for you as a business owner. It's not that you couldn't use a personal credit card that was issued under your social security number. You could.

But it would have to be for business expenses. And it's my understanding of the tax code that if you were alleging that, "Hey, look, these groceries and such are business expenses," and if you're found under audit, that deduction for the business interest would be disallowed for that. Now let's go to liability.

Because this debt has been issued in a separate tax ID number, separate from your social security number, that buys you an additional measure of safety. So if you default on this debt, you said that there is no connection to your personal credit report. Is that correct? Right. Okay. So if you default on this debt, your business goes bankrupt, you declare bankruptcy, you can't pay the credit card, you have the luxury of this not being connected to your personal credit, which is good.

And you would want to be very careful before you create additional liability for yourself on your own personal credit profile. Now, it may be worth it in order to save substantial amounts of money, but you would want to be very careful before you set that liability and move it over to your personal liability.

So I don't know what you should do, but I would say these three things would be my guiding point. Number one, if you can refinance the debt to a lower interest debt, you should, because there's no reason not to. And the way of doing that would be to apply for a new – the simplest way, apply for a new credit card or apply for additional credit cards under the identification of your business credit.

And if you can apply for a balance transfer card, then go ahead and get a balance transfer card at a reasonable rate, a low interest rate and a low balance transfer fee if possible. If you can apply for a new 0% card, then use that new 0% card for more business expenses and then move some of your cash flow over to paying off that other card.

So if you can lower your interest, you should. I would not lose the deductibility of that interest. I would be very careful not to build and put it over to my personal expenses so that I could keep the deductibility and I would be very careful about creating additional legal liability for me.

So what I would be more inclined to do is first pursue credit cards. Second, if you can't pursue credit cards, pursue some other form of business loan, something that is still on the business books but it is a lower rate. Apply for a business loan with the local credit union, try to refinance that debt at some lower rate and/or possibly investigate some kind of personal loan to the business by somebody who would accept that.

And try to renegotiate it, get more credit card debt available, but I would try to keep that separation between my person and my business. Go and review... Yeah, go ahead. Please go ahead and ask your question while I look up a resource for you. What's the difference between a regular business card and a business...

or a regular credit card and a business credit card? It's based upon what credit profile it's issued to. Okay, like if I go to a certain credit card company and they have a business card and a personal card, if I do the business card it's not really that much different, it's just that I'm assigning it to my business tax ID.

Right, so Mike, I'm not aware of any significant difference between something like what's labeled a business card versus a personal card in the sense that compare a business checking account to a personal checking account. They function very similarly, it's just the business account is going to say, "We give you more transactions per month," things like that.

What I'm most concerned with on whose credit profile was this credit card underwritten? And if it's underwritten on the basis of your business credit profile, then that means it's done based upon your business tax ID number, not on your personal social security number. And that's what I want to keep the difference from.

Right. Gotcha. Okay. Okay. I did an episode… And I guess the only other issue that I think I might run into is if I get a balance transfer card, they may not give me a balance big enough to absorb my current card. Of course. And so that's kind of, then I'm going to have two cards and both are going to be carrying balances.

Yeah, and for that, what I'd recommend, go ahead and buy my course when it launches next week and check out kind of the guide that I'll give you through that. I'll give you the short version now, but here's how you should approach it. Number one, as long as you can keep the separation here between your business and your personal life, and I think you can, you've already had credit cards issued in the name of your business tax ID.

So everything that relates to building up your credit is exactly the same as relates to your own personal scenario. So you should consistently apply for new credit that's available to you. Now, first, don't fall under the mistake to think that it's all or nothing. If you have a $21,000 balance and let's say you apply for a new card and you are issued a new card with $5,000, you will have the $5,000 credit limit and you can move $5,000 over to it with a 0% introductory interest rate and a 3% balance transfer fee.

That $5,000 transfer will save you $850 of annual interest coming out to $70 per month. So it's still in your best interest to do that. The second reason you should do this is by making that application and that transfer with that new $5,000 card, you will increase the total credit that's available to your business, thus decreasing your utilization ratio, which will enhance your business credit score, which will enhance your opportunities to apply for more credit.

So anytime you can increase the available credit to you, you'll become a better borrower in the eyes of the credit scoring system and that will help you to have access to more credit at better rates. Very rarely would you ever be able to take a $21,000 credit card and apply for a new one and have a new $21,000 credit card issued.

But even if you have a $5,000 or $10,000 credit card issued, you should still move $5,000 or $10,000 of your debt over to that new card. And then what you do is you just reprioritize your debt repayment schedule and then you prioritize paying off the expensive debt and you deprioritize the payments to the cheaper debt.

Now, in addition, don't think that you only can transfer balances by applying for a card that allows you to, that permits you to transfer the balance as a balance transfer. There are multiple ways for you to make and to move your money over to the card. So there are three ways that you can use money that's available to you, available credit.

They're purchases, cash advances, and balance transfers. So you may apply for a card that has a favorable balance transfer fee and you may be denied. But maybe if you applied for a card that was offering a low fixed rate introductory rate for purchases under your business ID, you could go ahead and qualify for that.

And so then you would just start using that business card for any expenses that you could charge to it in your business, while then using the freed up cash flow to pay off the old card. So don't think that you have to have a balance transfer fee. And then later on go and pay.

Exactly. Exactly. Makes sense. I got you. If it's 0% APR for 12 months, then I would just do all my purchases on that. Let it kind of store up there for a while while I'm sending all my money to the old card. And then try as hard as I can once I'm done paying that card down to pay down the 0% APR card.

Exactly. Exactly. And then what you'll do is you'll do this several times. So today you may apply for a new card and you may make multiple credit applications next week. And you apply for three or four cards all at once next week. And we go over this in the course.

In general, when you're making credit applications, you should make all your credit applications all at one time and do this about every 91 days or so. So you sit down, you apply for three or four new cards in the name of your business. And when you make that application, then some of them may be approved, some of them may not be approved.

But whatever gets approved, then you take that and you figure out how do I use this card effectively. And you pursue the strategy I just laid out that you affirmed of if you're issued a balance transfer fee card, then you transfer a little bit of balance over to it.

If you're issued a low introductory purchase rate card, then you switch to that. And then three months from now, you sit down and you do it again. And then three months from now, you do it again. And you keep doing this process, always refinancing your older, more expensive debt to whatever your best offer is that's available now until you get the total balance to zero.

I see. Okay. Okay. Well, cool. I'm looking forward to your course. Absolutely. And specifically, if you didn't hear it before, I would commend to you go back and listen to episode 368 of Radical Personal Finance, which was an interview titled "How to Establish, Build, and Utilize Your Business Credit," interview with Ty Crandall from Creditsuite.com.

He has some information and guides and his content. Because you're doing this under the business ID, some of his content and resources may also be helpful to you in addition to what I have done. Everything I have done is focused on personal but is still applicable to business. But there are some additional things that you might use from his work that is related to your business credit.

We go now to John in Georgia. John, welcome to the show. How can I serve you today, sir? Hi there. So I had a question about credit cards and privacy, actually. So my wife and I have had good luck with churning and things over the last few years and sort of enjoyed that process.

But from sort of a privacy perspective, that's obviously a pretty risky behavior. You know, lots of applications. It makes a huge purchase trend. That will sell to banks, that kind of thing. So I'm curious. Do you have any thoughts on any optimal ways to churn that still minimize one's footprint?

Or in particular, I was wondering, like, are there any unique ways that we can leverage the fact that we're a couple in ways that maybe someone who's single can't? Like, can we separate purchases between banks or isolate, you know, isolate certain categories of purchases to one person or the other to kind of diminish patterns of life being read by both parties?

That kind of thing. Are there any unique ways we can leverage the fact that we're all over the place? Interesting question. I like it. I want to make sure I understand when you use the term churning specifically, what are you doing and why? So, yes, this would be applying for credit cards and things like that in order to get the rewards and stuff right to travel points, cash back, those kinds of things.

We're not doing the manufactured spend. Right. So we've not yet decided to buy doing gift cards, things like that, partially because I think that's mostly been shut down by this point. And we're pretty limited. We're not doing the 40 a year. We're doing the few a year. We're just cash flowing and nothing crazy.

Okay. So it's a good question. And I think in some ways, let me begin with what should be clear. I actually have a section in one of my arguments for credit cards is that credit cards specifically and credit card loans can provide a way to privately purchase goods and services.

But, of course, that has varying levels of privacy. Now, here's the problem. If we're talking about ultimate privacy, then credit cards are never the most effective tool. If you are trying to minimize the patterns that are created for you of your purchases and you're trying to compare swiping a credit card when you go buy groceries and gas versus simply paying with physical currency when you go buy groceries and gas, then rather, obviously, the credit card is going to be less private than is the physical currency.

So in general, for somebody who is the most concerned with privacy, you always want to spend using physical currency whenever possible. And I think we should start with that. You're not going to get the ultimate privacy using credit cards. But you can sit down and you can say, well, what am I actually concerned about?

So, for example, is it actually that big of a problem for there to be a physical electronic record of the groceries that I'm purchasing and how much of my diet is devoted to sugar versus meat? Well, we're not currently taxed on how much sugar we consume every month. So this is probably a minor risk.

And you can weigh that against the benefits that you're receiving from applying for these cards that are sharing with you points, airline miles, et cetera. So if you are willing to give up some privacy in exchange for some of the benefits, then I think we could talk about how the credit cards are useful.

So a couple of suggestions for you. First, credit cards do have more privacy than does using a debit card for everything simply because the specific institutions that are involved in the transaction are mixed up. So if you think about financial privacy, there are multiple people involved that would have multiple entities involved from which we would desire to maintain privacy.

The first entity would, of course, be the merchant. Credit cards will not have a significant degree of privacy with the merchant because the credit card has all of your personal information, has the information on what your name is. And all of that is associated to that one specific credit card number.

So if you are swiping a credit card continually with a merchant, the merchant can always track you as an individual. So you're not going to have a lot of privacy there. Another person from whom privacy is the actual entity of the credit card issuer or the bank. Now, credit cards do buy you privacy from a specific bank.

If, for example, you put all your spending onto a credit card and each month you make one single payment over to that credit card of $2,000 for your monthly transactions, the bank doesn't know what those transactions actually were. And so this is buying for you some additional privacy. And I think this is well worth considering.

Compare this, for example, to the time when you go to apply for a mortgage loan. When you go to apply for a mortgage loan, you're going to be disclosing to your mortgage lender all of your banking records. And so they'll have a list of everything that you're spending. If you use your debit card out of your primary checking account for all of those transactions, now you're creating a paper trail with that lender.

And they can look down and they can see, oh, you spent such and such an amount at Walmart. We spent such and such an amount at the grocery store. You spent such and such amount buying guns at gun warehouse. You spent such and such an amount making donations to this political cause or that political cause.

Whereas if you do all of those transactions with a credit card, the only thing that that mortgage lender would have access to is the specific credit card payment of $2,000. And they don't know whether you were donating to a political fringe group or whether you were buying something that was illicit or whether you were just buying groceries.

It just says credit card payment. So I think that is a significant benefit of privacy for credit cards that many people would benefit from to appreciate and to recognize. The mortgage lender is not going to solicit all of your credit card statements. The only information they're going to get about your credit cards is what your total available credit is, what your total balance is, which they'll glean from your credit report.

And then from your actual checking account statements for the last three months, then they'll see that you're making credit card payments. So you're getting some privacy there. That's also helpful if somebody is searching for your actual information with your bank. So I shared quite a while ago on the show, I shared a story about somebody that I know who went to travel down to Mexico.

And one of the things that they learned when they were down in Mexico visiting with some of the local friends is the local cartels, the drug cartels, would pay informants in the local bank to disclose to them what the actual, how much money certain wealthy people had in their accounts.

So that when they kidnapped the children or loved ones of these wealthy people, they would know how much of a ransom to request. It would be foolish to request a $2 million ransom for somebody who has $2,000 in their bank. But if they requested a $20,000 ransom for somebody that had $20,000 in the bank, there's a good chance that that person would get it in order to redeem the life of their loved one who was kidnapped.

So if that were your threat model and you're considering, well, how do I maintain bank privacy of my banking transactions? Then it would be helpful to you to have that compartmentalization. And that's one thing that credit cards do by you is a compartmentalization, a privacy compartmentalization where not all of your information is in one place.

This is also helpful if you were to get into a legal battle, somebody were, or let's say that somebody were using illegal methods of trying to find out about your purchase history, such as doing a social engineering attack on your bank. And they call into your bank, they work their way through the system, they convince them that they're you, and they're, or they're, this used to be back in the day, it was very easy for somebody to get all of the private transaction records by just using the phone tree system.

So they would call into the local bank, use the automated system, put in your information, and it would list your last 20 payments. Well, if you were using a credit card instead of a bank checking account, then that would get you privacy there. So what I'm trying to give you examples is simply by paying with a credit card, you are diversifying your information and you're keeping some information private from your bank.

That gives you a level of privacy. Additional level of privacy is in what you said with the churning that you're creating in sort of compartmentalization. By having 10 credit cards and spreading your spending across those 10 credit cards, you are not creating one individual repository of information. So if somebody were trying to gain access to your personal information, they're executing, again, a social engineering attack on you or on your banks, et cetera.

They would have to do that times 10 instead of just with one place. Or if you are in a legal battle and your records are being subpoenaed by somebody, then they would have to do those subpoenas and find out about the information times 10 instead of just one. So these are ways in which the credit card does give you some level of privacy.

Finally, what you can do is sometimes you can use your credit cards, and this will be a problem with your churning depending on how you do it. But you can anonymize your credit card transactions even more by adding an additional cutout. So, for example, let's say that you use your credit card as a funding platform for PayPal and then you use PayPal to make the final payment.

Well, now you would have to a merchant for a particular product. Well, of course, you have a record. There's a record at PayPal of the specific merchant that you charge. There is a record with your credit card of the specific charge that you made to PayPal. And now there's a record with your bank for the payment to the credit card.

So if you're under investigation by a federal authority who has full legal power to subpoena all of your bank records, you can't conceal that transaction. But if your threat model is much more limited than that, you would have some additional privacy because the bank doesn't know that you actually put the payment through PayPal.

The credit card doesn't know what you actually bought through PayPal. And so Citibank can't sell that information like they do with everything else that you charge to their credit card. And PayPal doesn't actually know the identity of your bank. You don't have PayPal linked to your banking information. Now, PayPal in their next data breach, they can't disclose that your funding mechanism is actually Bank of America.

So you could do that with blur. Or one of the other things is you can always use a credit card for cash advance. The most private way to use a credit card is as a form of cash advance. You take money out of the ATM. You have physical currency.

You go and spend that money. And then you either transfer that balance from the cash advance card over to another card or you just pay it off. So those are some thoughts to your question to say, yes, using the credit cards is a compromise in privacy, but it does also have some benefits over some other things.

So you will have to weigh the benefits you're getting personally, the value of the miles, the hotel stays, et cetera, by your churning activities as compared to the loss of privacy. Well, interesting question on the cash advance thing. So I've never used cash advance for credit card just because the I've gotten the impression essentially instantaneously triggers an interest payment and things like that.

Is that true? Like how long do you have to pay it off? My impression with the clock started ticking immediately, right? Like 24 hours, you start getting hit. That's right. That's true. Or is that something that is generally true? Well, the cash advance transactions will immediately start an interest calculation.

Unlike a purchase, which will wait until a statement closing date to start calculating interest, a cash advance will trigger an immediate statement. Sorry, an immediate interest calculation. Secondly, often a cash advance rate is more expensive than an interest rate that subscribe to a purchase payment, especially if you're taking advantage of some kind of introductory special offer that's a marketing offer.

But that doesn't mean it shouldn't be considered. That doesn't mean it shouldn't be pursued. If you calculate the interest, remember that interest rates, just because it says, let's say that your cash advance interest rate is 15%. Now, 15% interest is a very high interest. But what does that actually mean in terms of actual numbers?

You pretend for a moment that you are going to go and buy a $5,000 item. And the other limitation of many credit cards is their cash advances are limited to a small number. But assume you've solved that and you can take out $5,000 worth of cash advances. If you actually calculate what the actual dollar terms of that interest would be, $5,000, and let's say that it were that it has 15% annualized interest.

So now we know that annually this would be $750 per year that's going to be charged on the interest. But remember that the interest is going to be calculated on a daily basis. So now that $750, let's just simplistically cut that by 365, the daily interest is $2. So what you're actually calculating, if you take a $5,000 advance on a credit card, you're just going to pay $2 per day until you pay off that debt.

So if you were to compare, let's say you keep that for a month and then you apply for a new card that has a 0% balance transfer fee. And you transfer that $5,000 debt over to that new card, thus eliminating the interest payment. If that takes you a month, you're talking a total of $60.

I don't think that's an unreasonable number, even at 15% interest to pay $60 to have access to $5,000 of cash. That's not an unreasonable number. Make sense? Yeah, that does. And the reason to do that as opposed to just debiting it from – just pulling the cash straight from the bank account would be just – it's the opportunity cost of you're effectively floating the cash and gaining $5,000 on credit rather than actually just burning $5,000 that you have on hand.

Right, right. And I'm talking here – And the separation. Okay. Well, especially also just with privacy. So you talked about privacy. Right. Well, let me give you a real example. If I were going to go and buy a car, I would not want to apply – and let's say I have many options available to me.

I have a good credit score. I have a good credit profile. But for whatever reason, I don't have the physical money in my checking account that I can go and buy a car. Well, what are the problems from a privacy perspective if I use a credit card – sorry, of a car loan?

First problem with a car loan is that in order to apply for that car loan, I will have to make an actual credit application to a credit company where that credit application will usually be more extensive than the credit application that I would make to a credit card. They might ask me things like what assets I have, what liabilities I have, and I might be forced to legally disclose those in an actual disclosure instead of them simply checking my credit report.

So now all of a sudden, yes, I owe my Uncle John $15,000 on a personal loan. That doesn't show up on my credit report, but I would need to legally disclose that in making an application for credit with a credit agency. So by using a credit card, I could eliminate the need for me to disclose that personal information that might also affect their underwriting.

Secondly, in applying for something like a car loan, let's say that I needed a car because I had previously been driving a company car and now I lost my job, I got laid off, and I no longer have access to the company car. Well, if I go and apply for a credit loan, I have to disclose my income as being zero because I'm currently unemployed.

But if I have a couple of credit cards that have a credit limit, I don't have to make any disclosures one way or the other. They're not going to ask me what my current income level is. I may already have those credit cards established from years ago when my income level was very high.

And so this may be helpful to me to be able to gain access to credit in a time when I might otherwise have a difficult time. So by using the credit card additionally, sorry, if I make an application for a car loan, then I'm collateralizing the car loan, which could put me in a position of additional insecurity, where if I can't pay that car loan as agreed, then the car company has the legal right to collect on that debt by repossessing the car because the car serves as collateral.

In addition, now I'm creating a connection between the VIN number of a specific vehicle that I'm purchasing to a specific loan, which means that if somebody is seeking to find my property, they're going to have a much easier time finding it because look, car loan, what's the VIN number of that application?

Then they go to the DMV, they run the VIN number, they find out what the plate is, and now all they need to do is search the license plate reader databases and they can quickly find my car. And that information can be searched retroactively. So now, yes, I'm in a tough spot, but they can go back and search the last 60 days of automatic license plate reader systems and find out that my car is continually parked at this particular apartment complex.

And now I may be implicated in something like this apartment complex, there's a drug house in it. And now I'm implicated by association because my car is parked nearby or a house of prostitution or some other thing like that. So all of these things are significantly problematic with a car loan.

Additionally, things like payment, sorry, ownership information. If I take out a cash advance on a credit card and I take out a $5,000 cash advance and I use that to go and purchase the car and then my wife and I title that car in her name rather than in my name, or we title that car in the name of our trust or some sort of business entity instead of in our own personal names.

Now we've created an additional level of compartmentalization because of the fact that we don't have to have every single asset specifically tied to our credit profile. So if that car was purchased with cash, with a cash advance from a credit card, it was titled in my wife's name. It's now no longer, depending on whether I live in a community property state or not, it's now no longer my specific property.

So if my creditors are suing me for defaulting on my credit card, my wife's car isn't necessarily connected to it. Now, I would not want to be in a situation where I'd want to be in a courtroom because in a courtroom I might legally have to disclose what did I spend the money on and now they might follow the transaction through.

But that's so unlikely in most circumstances as to not be worried about. So all of those would be examples of reasons why if I were in that situation. I got laid off from my job. I didn't have a car. I needed to buy a car. I needed a good $5,000 car because I'm starting a new sales job, blah, blah, blah.

Whatever circumstances we create that I actually have to borrow money for a car, then I would do it with a cash advance on credit card or credit cards. And then I would just simply deal with that cash advance separately rather than taking it out in a car loan. Does that make more sense now?

That makes a ton of sense. So last question, is there any risk to the score with a cash advance? I'm assuming I'm paying it off immediately, right? But does it reflect oddly in any way? No. My understanding is the cash advance is just simply listed as a loan. So it will be subject to the terms of the card where, again, you have to be careful of whether that's a separate interest rate or how such a cash advance.

If you have balances on a card, sometimes the balances can be mixed up in terms of where our minimum payments applied and what interest rates are applied. But in terms of your credit report, it's just going to look like you have a $10,000 credit limit and you took a $5,000 cash advance on credit card one.

It's just going to look like you owe $5,000 on credit card one. There's nobody – unless somebody were actually able to see your physical statements or electronic statements with the actual information, they wouldn't know that you took a cash advance. They would just know that you have a $5,000 balance on your credit card.

Cool. So, yeah, I want to make sure that if it's charging interest immediately, it doesn't look like I missed a payment or anything like that. Correct. Cool. Correct. Good. Awesome. I appreciate it. Absolutely. Thank you for calling in. All right. We go now to Michael in Washington. Welcome, Michael.

How can I serve you today, sir? So my question is more of paying off my credit card debt. And I'm not sure if you want me to give you a back story. First, can you speak directly into your phone, not on speakerphone? I've got a little bit of a shaky connection here.

Yes. I am speaking directly to my phone now. Great. Okay. Give me an overview of your situation and we'll talk about some strategies. Okay. So I'm currently 42 years old. I was recently married. I take home income after all deductibles. It's about $1,000 a week. My wife makes similar, but I have a $31,000 credit card debt that I'm trying to pay off before my kids start arriving.

Meaning we're planning to have kids in the next year. Great. So currently I have a full-time job, which makes me some money. I'm also driving Lyft part-time. I'm trying to use Lyft to pay off my credit card debt. And I figured if I want to pay it off in two years, I pretty much have to bring in an extra income of $300 each week to make those payments.

Okay. Yeah. Also, the money that I bring in besides the Lyft, pretty much pay for all the bills around the house, rent, and car payment, stuff like that. And within a year, my wife was able to save up $10,000 for emergency fund. Great. But I want to do a better job as far as paying off my credit card debt.

Okay. Outside of this $31,000 of credit card debt, do you and your wife have any other loans? A car loan. Okay. Of $24,000. And how much is the car worth? And that's it. You know, it's a 2017 Prius, which I used to drive for Lyft. So I'm not sure how much it's worth.

It's not worth more than, I don't know, $20,000, I figure. Okay. And what was the source of the credit card debt? What did you buy? A bunch of stuff that I don't need. Do you still have any of the stuff that you could sell? Not a whole lot. Not a whole lot, really.

I mean, I am working on that on the side as far as putting stuff online to sell. For the last two months, haven't really sold anything. There's not much of an interest on that. And in the last, when did you and your wife marry? How long ago? Two years ago.

And in the last year, how much debt have you and she paid off? Well, I just want to make sure that it's clear that she doesn't own any of my debts. Those $31,000 is all mine. Understood. And I paid off $2,000 so far. So in the last year, you've paid off $2,000 of your balance.

A year ago, your balance was $33,000, and today it's $31,000? Correct, sir. Okay. Correct, sir. When you clarified that your wife doesn't own that debt, were you simply clarifying that you were the one who made those initial charges, or were you indicating that she financially does not contribute to the payments of the debt, rather that all of the debt payments are coming out of your share of the household income?

Both statements are true. Okay. What does she think and feel about the credit card debt then? She doesn't like it. It's my fault. I mean, when I was listening to your previous podcast, one of the things you mentioned is actually having an emergency fund. So when we got together – she actually just started working earlier this year.

So when she started working, I was like, "Hey, we want to set up an emergency fund." So her income was just trying to stack up. How much total savings do both of you together have currently? Currently, I want to say $12,000. Okay. And of that $12,000, how much has been saved from her earnings with her new job?

It's actually all $12,000 is from her new job, her earnings. Okay. My income is just basically paid for all the bills and my credit card debt. Got it. So when were you and she hoping to have children? What's your timeline? We're hoping in a year. So yeah, end of 2019.

And in terms of the actual terms of your credit cards, what are the current interest rates and how many cards do you have? I have five credit cards and basically they're all within 10% to 11% interest. Do you know what your credit score is? 700 max. I don't remember the latest.

Sorry. And you owe a total balance of $31,000. Do you know what your total available credit is across all of your credit cards? My highest one is 15 and the next one is 10 and then it's like $6,000 and $3,000. So $15,000 plus $10,000 plus $6,000. Oh, my calculator died just a moment.

$15,000 plus $10,000 plus let's do this manually, six plus three. So about $35,000 then of total available credit. Is that right? Pretty close. Yeah, pretty close. So here are some suggestions for you to consider and I'll just give them to you in the order that they come to my mind and they'll start from big picture to specifics.

First, the situation that you're in with regard to being married and yet having a different financial background is a difficult situation to be in. And some people, different people approach this type of situation differently. Some people say, well, it was my credit card debt. I had it before we were married, so I'm just going to do it and I'm going to pay it all off.

Unfortunately, even if you were to actually follow through on that financially, it is impossible. In my opinion, it is impossible for there to ever be an exclusive embrace of responsibility. It's not possible that you would just be the one to pay it off. No matter what decision you make, even if your wife saves every dollar that she earns, and even if you put every dollar that you earn towards the credit card debt, there is still going to be a joint bearing of responsibility.

When you're out driving Lyft at night and on the weekends, that means that you're not home cuddling on the couch with her. Thus, she's bearing a part of the cost. When you're out working, you're not doing other things that could be doing. When you're spending money from your income and you're putting that money towards debt repayment, that's by definition money that's not being saved for your future children, or that's not being saved for you to buy a house to live in together, etc.

So in general, I hate to hear of husbands and wives who have different financial priorities and different goals. Now, I do think it's healthy for you to discuss with her what were the specific actions and responsibilities that led to your current financial situation. It's healthy for you to bear the responsibility and say, "I made bad financial decisions." And it's healthy for you to acknowledge that, at least by the information that you've shared with me, your wife did not.

That's worth acknowledging both to her and to yourself and to anybody else who's involved just so you can have a clear idea of what's involved. But the reality is, when you married your wife, you married her for better or for worse. When you married your wife, you married her and agreed to take on all of your lives together.

So if you have some kind of physical ailment, she doesn't get to look at your physical ailment and say, "Well, my husband is handicapped, so that's his problem. I'm not going to take responsibility for it." Or let's say that your wife has some kind of psychological problem. You don't get to look at her and say, "Well, that's your psychological problem.

I don't have to deal with it." And so why is it any different when it comes down to your financial history? She can't look at you and say, "Well, you've got $31,000 of credit card debt. That's your problem. You've got to deal with it." That is a recipe for disaster.

That's a recipe for divorce. When you marry, you unequivocally, unreservedly commit yourself to another person. And that means all of the good things and all of the bad things. And unfortunately, I think it's very unhealthy that we even indulge for a moment this idea that, "Well, you have your debt and my debt." Well, whose money is it if you inherit a million dollars?

Is it your money or is it her money? Now, there is a level at which legally there are some distinctions. So, for example, if you and she were to divorce, then the divorce court will understand and will pay attention to whose debt it was and who had an inheritance and who owned what assets, etc.

But I think that's a recipe for disaster, and you should never even consider that in your thinking. Rather, both you and she should be absolutely unreservedly committed to us. When you marry, I'm convinced there is no more room for yours and mine. There is ours. Now, that's hard because those feelings, for example, your feelings of inferiority for your bad financial decisions in the past, perhaps her feelings of lack of trust and confidence in your financial acumen and your willingness to make good decisions, those feelings don't just go away because you think they should.

They're real. But in working through things together, you will be far stronger. And you'll be far stronger if you and she tackle it and say, "We're in this together." If your wife were to lose her job today or to get sick or hurt, you don't have the option of saying to her, "Sorry, honey, you're not working, so I'm not supporting you anymore.

Pay up. Pony up." And the same way goes the other way. Just because you brought debt into the marriage, she doesn't have the option, in my opinion, of saying to you, "Sorry, honey, that's your problem. You've got to deal with it." Because if it's just your problem, you've got to deal with it, she's going to suffer now because you're going to be out working and she's going to be suffering in the future because, "Yeah, we want to go buy a house, but I can't because I have too much money.

Sorry, too much debt," etc. And so the best way is in any way possible to tackle this together. Because together as a team, with both of you fully on board, with both of you contributing everything to the marriage, with both of you increasing the income for the household, with both of you reducing the expenses of the household, this will forge, this path of adversity can forge a deepness in your relationship that really can come no other way.

My wife and I have been through financial problems since we married. I thought because I was a financial guru and a financial advisor, everything was going to be great. I made some stupid decisions and they were primarily my business decisions that I made earlier in life that took me a long time to fix.

But in working through those, I took responsibility for them. But by collaborating and being committed to the same thing, it helps to build a forge and a bond of connection between us that can't come any other way. And in 2018, there's this idea that marriage should only happen when people are financially independent, when people are financially stable.

And there's this idea that two perfect people come together and because two perfect people come together, they have this opportunity to somehow have this blissful relationship. That's absurd. Marriage is a matter of two people coming together who are clearly imperfect. And together as a team working through those things, learning from one another, helping one another, and together building a solid family forge.

And oftentimes, as long as you have a strong foundation of commitment to one another, adversity and going through that period of adversity can ultimately prove strong for your relationship. So to whatever extent is possible, given your personality, your wife's personality, the specific successes in your relationship and the specific hurts in your relationship, I would encourage you together to brainstorm ideas together for you to take responsibility for the mistakes of the past, for her to take responsibility for the mistakes of her past.

But to say, "Now that we are together, we are no longer two but one." That means that we make decisions together. There is no yours and mine. We are no longer two. We are one. There is no more you, me. There is only us. So we owe money. We owe $31,000 of debt.

We have a family household income that comes in from these two jobs. We have family goals and we have family problems and we work through those things together. If you will build that foundation and if you will lead in setting that foundation, then together as a team, you can tackle these things really, really well and effectively and quickly.

And the work is hard because it means you have to increase your income and you have to decrease your expenses. And all of those decisions of increasing your income and decreasing your expenses are going to come at a cost. It's going to come at a cost of additional time working.

It's going to come at a cost of additional time studying. It's going to come at a cost of frugality. Your date nights are going to be a bottle of wine and a loaf of bread down at the local park instead of $100 dinner at the fancy Italian place. These things all come at a cost together.

But if together you work together and you build an aggressive plan and you set a hard target and you encourage one another towards that date and you get together as a team, then you can bust out this $31,000 of debt really in short order. Now, that's all psychological stuff.

But if that's there, you don't need anything else that's practical and tactical. You'll figure all that stuff out because the reality is the only way to get out of credit card debt is to pay it off. But if that foundation is lacking, then this road that you're on of you trying to say, "Well, I've got to pay it all off," this road that you're on will be very lonely and very difficult and will take a long time.

And you will probably be frustrated if you're not in it together. You'll probably be frustrated because you may want to move from your expensive apartment to a cheaper apartment to save money. Or you might want to sell something. And your wife says, "No, you can't do that. You've got to figure out how to pay off your credit card debt without selling something." Well, you've got to work together on these things.

So if you can solve that foundation where you and she can be united together as one, facing your collective financial problems as one, then you build a powerful team and you can work really well together. Now, moving on. Practically, the recipe and the path of paying off debt is very simple.

You want to earn as much as you possibly can. And you want to spend as little as you possibly can. And you want to pay as aggressively on your debt as you possibly can. That's the path through this. Now, I am convinced that the best way to do it is, as long as your family decision will allow it, and I'll clarify that in just a moment, is to be an extremist.

It's much easier to be an extremist for a short period of time and face hardship for a short period of time where you're focused and you're determined than it is to face moderate difficulty for a longer period of time. Now, I do hold here that there are things that are more important than money.

So, for example, let's say that we're living in an expensive house or an expensive apartment and we're paying $2,000 a month of rent. And I think that, well, listen, we could just go and we could move into my parents' shed in their backyard and pay nothing in rent. I need to very carefully consider that financial decision in light of other circumstances of my life.

So, for example, if my wife is on board with such a decision and she's willing to deal with the sacrifice of living in my parents' garden shed so we can put an extra $2,000 over the next six months and get out a credit card in six months, then we'll do it.

But if she's not okay with that or I recognize that that would cause intense relational stress and that by putting her in that close proximity with my parents, I would be putting her in a difficult situation because of her stress or her relationship. Or if I'm, then I wouldn't do it.

I'm not going to prioritize money over my wife. I'm not going to prioritize money over my family. I'm not going to prioritize money over what's morally right. So you should subject your financial decisions to that big picture decision-making tree. But then within that, go as extreme as you possibly can.

And the best way to do this is going to be for you and she to look and say, "How much can we do to earn as much as possible?" Just a simple example, you can drive Lyft, but you have this car. So is she willing to drive Lyft as well?

Maybe by keeping this car on the road full-time where either you're driving or she's driving and you're both working and then you're both getting sleep. Yeah, it's going to be hard, but we can increase our earnings by doing this. And then maybe you can lend the Lyft car out to your brother who also can earn and he pays you a royalty for the use of your car or however it works out.

You then look at your job and you do everything you can in the context of your job to earn the most amount of money possible. Then you look at your expenses and together you look at your expenses and you say, "What can we do to cut our expenses?" So in looking at your expenses, there are things that both of you can contribute to.

She may be really good at driving a long time and so you may love to cook. And so you say, "Okay, I'll cook and I'll do groceries and you drive." Now on the flip side, she may be able to look at your food budget and say, "Hey, this thing stinks.

We're going to cut this from $700 to $150." And that's a contribution of her time together. So you look at it and you say, "How high can we get our income through working the maximum number of hours we can handle, through producing the most work per hour that we can handle, and by producing the most valuable work that we're capable of producing while we're working?" On our expenses, how low can we get our expenses within where we are right now?

And then how much can we send towards our debt? Now tactically as well, then you look at your debt and you say, "You make a plan for what order should I pay off the debt?" In general, the order should include a number of different factors. One factor is the-- So I may have a-- Yeah, go ahead.

So I may have a third option on this. But my question is, is there a benefit to consolidate my debt to a maybe lower interest and then try to pay that off? So a few years back, I actually inherited my parents' house. The house is still in payoffs under my name.

But for whatever reason, I'm not qualified to take out a loan from the house as a second mortgage or something as a collateral. I think I have too much debt currently, and that may be part of the reason that I wasn't qualified. Right. So in general, I am very risk-averse.

And so I would-- So let's start with this. Is the house owned free and clear or does it have currently a mortgage on it? It's free and clear. Okay. I would not encumber an asset such as a free and clear house with debt in order to pay off an unsecured debt.

I think that's a bad move. I would rather have the house free and clear-- Thank you. --rather than--and have--and pay 15% interest on my credit cards than I would take out a loan on the house just to pay 5%. And this is where you have to look at how quickly you're actually going to pay off the debt.

So if you're going to pay off debt slowly, you're going to pay off this $31,000 over the next 10 years, then your interest rates are a huge deal. Let me give you an example. You said that your interest rates are anywhere from 10% to 11%. So let's use 10%.

So $31,000 of debt at 10% is $3,100 per year of interest. Now, if it takes you 10 years to pay off this debt, then holding everything constant, you would pay $31,000 of interest and also pay off this $31,000 of principal. Now, if you pick a year to pay off this debt, then you would pay off $31,000 of principal and $3,100 of interest.

Now, if we change our interest rates down to 5%, then the difference between you're paying a 5% interest rate and a 10% interest rate is the difference between $3,100 and $1,550. So it's only a difference of $1,500. In the grand scope of your life, the difference in interest rate, if paying it off over a year, of $1,500 is not that big of a difference.

Now, if it takes you 10 years to pay off this debt, then the difference between $31,000 and $15,000 is much more significant. So there are a couple of things that can be true simultaneously. One, you should get the lowest interest that you can. Two, depending on how fast you're paying off debt, you should worry about interest or not worry about interest depending on that.

So this is where you wind up the question, are we going to be extremists and pay off our debt quickly, in which case interest is a less important factor, or are we going to take a long time, in which case interest is a more important factor? My choice is to be an extremist.

That's what I would do. Now, you may not be able to do that given your circumstances. Your wife may not be on board with that. You may not like that. And so you might make a different decision. But if it were me, I would not encumber a free and clear asset to pay off an unsecured asset.

Rather, what I would do is I would systematically work through the process of the credit card game to make sure that I keep my balances at 0%. I would apply for every credit card that I could get to improve my credit score, use the good best offers, and I would keep whittling away at the credit card debt with paying that down and refinancing it at the best terms until I cleared it and paid it completely off.

I understand. Makes sense. So I'll give you – you are a good candidate for the course that I'm creating. You should consider trying it, at least trying it and seeing if it helps you because the process of paying off the credit card debt, your situation is one of the situations that I considered in this.

So these things are not mutually exclusive. It's not that you either play credit card games or you get out of debt. You can play credit card games while you're getting out of debt. And so you want to make sure that you are enhancing your credit score, that you're applying for credit, that you're refinancing your cards systematically little by little.

I don't care if you have 20 cards three years from now as long as your total balance has gone down and has gone down to zero. So you can play the credit card game to refinance your debts while also paying off the total balance. One of the things that always bothered me is I was able to get a 0% interest for the car loan, but at the same time, I wasn't able to get like a new low-rate credit card interest.

How many credit cards did you apply for? About six. Okay. And all six of them denied you? Pretty much. Okay. So it's not a surprise. Except one. So it's not a surprise. So first, do you have a good payment history on your previous debts? Yes. I always try to pay my payment.

Good. So that's good. That's very good. Now, the biggest impact then to your credit score will be this. Your relatively low income, your low income as compared to the total amount of debt that you owe, and your high utilization ratio, meaning you don't have a lot of available credit.

Do you know how much available credit you have across all your cards right now? How much more could you borrow if you wanted to? I'm pretty much maxed out. Okay. So here's where – let me just give you an example. You are maxed out. And when you are maxed out, that has a huge impact on your credit score and also to the formulas of the underwriting credit card companies.

So let me give you an example of as to why working together with your wife is a big deal and building your finances together as one. So the reason that you were able to get a 0% car loan on the purchase of your car was a couple of things.

Number one, that loan is a secured loan. Number two, that loan – that car was sold to you most likely at a higher rate because the company also held the financing. You probably used the Toyota financing, and they know what the car is worth. The car maintains its value.

And they can sell the car to you at a higher rate when you actually borrow the money. So now this is not always true because sometimes the company who is lending the money on the car will get more money for the financing than they will for the actual sale of the car.

But in general, they sold the car to you at a higher number because they also held the financing. You weren't concerned totally with what was the total price of the car. You were concerned with what was the total – what was the monthly payment. So because the fact that it's a secured loan, they can come and they can get that car anytime.

And that's a much lower-risk loan than you applying for more credit. Now, as a credit card debtor, you look like a bad borrower because you owe – you've used almost all your available credit. So from the perspective of a credit card company, you look like somebody who is in a tough spot.

You look like somebody who is unable to pay their bills. So here's what I would do. First, do you have – other than the $12,000 of cash, do you have any other money or any other investment accounts right now? Look, 401(k) and that's about it. How much money do you have in your 401(k)?

Maybe $10,000. Okay. So what I would do if I were in your shoes – and here is where, again, you will want to very carefully make sure you understand this type of strategy and how this works. But what I would do if I were in your shoes is I would take a significant amount of money from my savings and perhaps even consider taking out a 401(k) loan.

I would pay down my credit cards. If you could take your credit card balance – let's say you have a $35,000 total available credit and a $31,000 balance. What that means is you have effectively an 88% utilization ratio, which kills your credit score and it kills your opportunities for additional financing.

If you could take a $5,000 loan on your 401(k) and you could take $10,000 of your available cash and you could use that and put that towards your credit cards and make a down payment – pay down your credit cards by $15,000, it would drop your utilization ratio. In my example, it would drop you down to $16,000, $35,000.

It would drop your utilization ratio to – hold on – it would drop you to a 45% utilization ratio. So what I would do is I would make a payment towards my credit cards and drop my utilization ratio down to 45%. I would wait a month and then I would apply for six new cards.

Now, your new cards then would be approved. At least one or two of them would be approved. I would apply for some that offer a 0% purchase on introductory purchases. I would apply for whatever 0% cards I could. And I would apply for six or eight of them in a single day and try to get as many of them as I could.

Now, depending on what's approved – and you'll have at least one or two of them approved if you were to make such a dramatic difference in your payoff – depending on which of them is approved, I would then start to siphon the money back into my savings and I would then start to siphon the money back and pay off that 401(k) loan.

And by – until I own – let's say that I would have all the cards, $35,000 still available credit, and I would move – and let's say I were approved for another $15,000 of available credit. That would bring up my total available credit to $50,000. Now, fast forward a few months later, you change your spending to go on to those new cards, you pick all that cash and you refill your savings and/or you take a cash advance on a card, and you put the money back in your 401(k) and you put the money back into your savings account.

Now, let's pretend you still have a $30,000 debt, but now you have a $50,000 available balance – available credit. So now your utilization ratio is 60% instead of its current 88%. That makes a big difference in your credit score. You can recycle that again and again going through while you pay down the debt.

Now, in a worst-case scenario, if you don't – let's say that you take the money from your savings or you take the money from your 401(k) in terms of a temporary 401(k) loan, and then you lose your job. Well, you still have the credit cards. You still have the available credit that you could then charge again.

You're not going to be in any worse shape. You just then start charging those cards again, and you would build the debt back up while you – until or unless you needed to. So that's what I would do because that will make a big difference in your credit score.

It allows you to refinance it while simultaneously doing everything possible to pay off the debt as quickly as I can. I hope that wasn't too much of my – I threw a lot at you. I'm going to listen to you over and over again. All right. Well, congratulations on your marriage.

Congratulations on your marriage and congratulations on working to get out of debt. Thank you. I'll give you my one final thing. There is a sense in which it makes sense to plan on personal decisions as far as marriage and children and such related to finances. But I also don't like it when people – just my personal sort of semi-solicited advice.

I think oftentimes people prioritize personal things too much. And so with the finances, I personally would not wait to marry depending on a financial situation, and I wouldn't wait to have children depending on finances. I think that both of those personal decisions are more important than finances, and you can always make the finances work.

That said, of course, it's a lot easier to deal with children and all of the expenses and everything associated with that if you don't have any debt. Thank you all so much for calling in for today's show. I enjoyed talking about it with you. Look for Monday to launch of the new credit card course, and I hope that it will serve you effectively with some of these tools and strategies.

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