The Credit Card Isn't The Problem

Jason can take out a signature loan to knock out his $5,000 credit card debt. He also has a $30,000 car loan. Dave says the interest rates on the credit cards aren’t his problem.

QUESTION: Jason in Texas is starting to get his financial life in order, and he has an opportunity to take out a signature loan to knock out all of his credit card debt that totals about $5,000. Jason also has a $30,000 car loan. Dave says the interest rates on the credit cards aren’t his problem—he needs to sell the car.

ANSWER: Man, I’d be about the business of getting out of that mess, because you’re trying to run a race with ankle weights on. You can’t fix the mess that the car represents by saving $500 or $600 on this $5,000 debt. Making $50,000, you ought to pay off $5,000 a whole lot faster than that, but you can’t while you’re trying to run a race with ankle weights on. That’s what this car represents. It’s just absurdity. I’m going to spend 90% of my energy, if I’m in your case, getting rid of this car and maybe 5% or 10% of the energy worrying about the interest rate on these credit cards. The interest rate on your credit cards is not your problem. The car debt is your problem. It’s insanity. You really have got to get out of that mess.

If you want to consolidate your credit cards, that’s fine. But it’s really not going to save you that much money. The problem is you’re going to think you did something then—and you didn’t do anything. It just doesn’t matter. It’s not big enough to help you. Go ahead and do it if you want, but it’s 2% of your problem.