CLOSE Your Credit Cards To Escape DEBT

Summary

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Earn Your Leisure: "CLOSE Your Credit Cards To Escape DEBT"

Hosts: Rashad Bilal and Troy Millings
Financial Expert Guest (Name not specified in transcript)
Release Date: April 6, 2026
Podcast: Earn Your Leisure, iHeartPodcasts

Episode Overview

This episode tackles the realities of overwhelming credit card debt and strategies for escaping it, featuring practical advice from a seasoned financial expert. The hosts and guest break down effective debt reduction methods, the impact of credit utilization, the differences between personal and business credit, and debunk common myths about credit inquiries.

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Key Discussion Points & Insights

1. Immediate Actions When Overwhelmed by Credit Card Debt

• Stop Creating More Debt:
  "Number one, you have to make sure that you stop using like the card stop, you know, buying things so that you, you can, you can manage it properly." — Financial Expert [03:08]
• Close the Card with a Plan:
  • If debt is truly unmanageable and repayment within 90 days seems impossible, close the card immediately.
  • Don't just close it and walk away—coordinate with the bank to arrange a payment plan or settlement.
  • If ignored after closing, the account may become a charge-off within 30–60 days, compounding the problem.
    "Close it, but have a plan to work out either a settlement with the bank or an agreement to pay it back." — Financial Expert [03:38]

2. Settling Credit Card Debt

• Negotiation is Possible:
  • You can call banks to negotiate either a reduced lump-sum settlement or better payment terms, especially during tax time.
    "Banks settle tremendously during tax time... so now's the time to try to, you know, come up with a conclusion on how you're going to settle your balances." — Financial Expert [04:20]
• Balance Transfers Unlikely:
  • If you're in deep debt, getting a new card for a balance transfer is often not realistic due to lack of borrowing power.
• Still Responsible:
  "You can settle, you can't settle, but you got to know that you will have to pay it." — Financial Expert [04:43]

3. Real-Life Debt Experiences

• Personal Story from Co-host:
  • Describes maxing out a college credit card, being late, and seeing interest jump from 19% to 29%.
  • After calling the bank, he secured a consolidation plan requiring six or seven consecutive payments.
    "I looked at the payoff date... it was 2035 and this is like the year 2000. I'm like, House? Yeah. I'm like, there's no way this is going to happen." — Co-host [05:13]

4. Which Debt to Pay Off First?

• Snowball vs. Targeted Approach:

  • Snowball Method: Pay off highest interest debt first for the fastest/cheapest exit from debt.
  • Credit Score Focused: If improving your credit is a goal, prioritize paying off any card over 48% utilization first—a critical threshold for credit scoring.
  • Banks see anything above 48% utilization as “maxed out,” generating significant score penalties.
    "If your goal is to just get rid of your credit card debt and you don’t really care to, to raise your credit score at this time... then the snowball effect is probably the most effective..." — Financial Expert [05:58]
    "If you can get all of your cards under 48%, then you don't have what's called the max out penalty on your credit score." — Financial Expert [06:27]

• Breakdown of Utilization Penalties:

  • Over 48%: Subtract ~15 points per card from your score (mortgage scoring model).
  • 30–47%: Subtract ~10 points per card.
  • Under 30%: Next tier to target for best credit scores.
    "When it comes to credit cards, [48% utilization] is showing that you're maxed out." — Financial Expert [07:06]

5. Business Credit vs. Personal Credit

• How They're Evaluated:

  • Business credit is built and evaluated separately from personal credit, typically relying on a business’s credit profile.
  • Great personal credit makes it easier to build strong business credit via “personal guarantee” (PG)—offering lower interest rates and increased approval chances.
    "If I have great personal credit, you absolutely can... vouch for my business credit with my personal credit because, number one, lower interest." — Financial Expert [08:46]
  • Net 30 accounts (vendor credit lines) are less necessary if you have strong personal credit.

• PG (Personal Guarantee):

  • Using your personal credit to back business credit applications often results in better terms.
    "I personally build business credit on the back of my personal credit and that does not mean that they're reporting on my personal credit profile." — Financial Expert [09:00]

6. Impact of Credit Inquiries ("Hard Pulls")

• Personal vs. Business Inquiries:

  • Personal credit card inquiries are more damaging than installment loan (e.g., auto loan) inquiries.
  • Installment loan pulls within a 14-day period are typically deduplicated (counted as one per credit scoring).
  • Credit card inquiries: Each inquiry is counted individually, but they only collectively impact up to 55 points on your score.
    "Increase are only worth up to 55 points. So I tell people all the time, people worry about increase more than they worry about payment history, credit utilization, credit age." — Financial Expert [11:13]

• No One Gets Denied Just for Inquiries:

  • Banks will not deny a credit application solely due to too many inquiries if the rest of your profile is solid.
    "There has never in the history of ever where you were... denied solely for increase." — Financial Expert [12:05]

• Don’t Let Fear of Inquiries Prevent Credit Building:

  • Focus on payment history, utilization, and account age, not just inquiries.

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Notable Quotes & Timestamps

• "If it's just like out of your control and you do not foresee yourself being able to pay that credit card down within the next 90 days, the best thing to do is honestly to close that card right now so that you can then work on a payment plan." — Financial Expert [03:25]
• "People think maxed out is 100%. After 48%, banks are looking at you like you have a maxed out card." — Financial Expert [06:17]
• "You should not be trying to save or protect your credit increase more than you are building credit... Because a lot of people will not build credit because they're scared of increase." — Financial Expert [11:31]
• "If I have great personal credit, you absolutely can... vouch for my business credit with my personal credit because, number one, lower interest." — Financial Expert [08:46]
• "There has never in the history of ever where you were... denied solely for increase." — Financial Expert [12:05]

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Timestamps for Important Segments

| Timestamp | Segment/Topic | |-----------|----------------------------------------------------------------------------------------| | 02:43 | Options for people overwhelmed with credit card debt | | 03:06 | Steps to take if you can't pay down debt; when to close cards | | 04:20 | Settling debts and timing for tax season negotiations | | 05:02 | Co-host's personal debt payoff story | | 05:40 | Snowball vs. utilization-focused debt payoff strategies | | 06:17 | Impact of utilization thresholds (48%, 30%) on credit scores | | 08:08 | Differences between personal and business credit; using personal credit for business | | 09:27 | What a PG (personal guarantee) is and its benefits | | 10:18 | Credit inquiries: differences between personal and business, and their impact | | 11:13 | Credit inquiries are less important than payment history and utilization | | 12:05 | No one is denied solely due to too many inquiries |

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Summary & Takeaways

• If you're overwhelmed by credit card debt: Immediately stop further spending, realistically assess payoff ability, and consider closing the account with a solid repayment/settlement plan.
• Settlements: Now is an optimal time, especially around tax season, to negotiate with banks.
• Debt Payoff Strategies:
  • Snowball method—paying off highest interest debt—remains effective for reducing debt fastest.
  • For credit score improvements, get each card under 48% utilization ASAP, then below 30%.
• Business credit is easier to build with strong personal credit; don’t fear using a personal guarantee.
• Mythbusting: Credit inquiries have limited effect and are never the sole cause for denial—build credit proactively and responsibly.
• General Advice: Be intentional, track spending, and leverage available tools to stay in control.

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This episode serves as a practical masterclass for anyone struggling with credit card debt, clarifying major misconceptions and arming listeners with concrete solutions they can implement immediately.

Transcript

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[Financial Expert]

taxes and fees extra. See full [e-mail] let me ask you this.

[Host]

As far as the people trying to recover from bad credit, if they're overwhelmed with credit card debt, what are some options? Can they call to negotiate a settlement? Can they call and negotiate? Better rate, obviously bankruptcy. But like, if you, if you just in a situation where you just, you can't get it paid down, what are

[Financial Expert]

some options for people so when it comes to credit cards, if you just can't pay it down? Well, number one, you have to make sure that you stop using like the car stop, you know, buying things so that you, you can, you can manage it properly. Number two, it's so tough right now because we're at, we're in a, we're in a, we're in a time where credit card interest rates are the highest that they've ever been, ever. So a lot of people with credit card debt is just mounting. You know, it's just growing every single month. So the best thing you can do at this point, if it's just like out of your control and you do not foresee yourself being able to pay that credit card down within the next 90 days, the best thing to do is honestly to close that card right now so that you can then work on a payment plan. Now don't close it and then forget about it and not contact your bank. No, close it, but have a plan to work out either a settlement with the bank or an agreement to pay it back. If you close it and do nothing, then it'll probably end up a charge off within 30 or within 60 days. But closing it so that you can stop the charges temporarily stop, you know, stop the interest a little bit and work on paying it back, you can, I would say you can of course, you know, get another credit card, you can transfer that balance. But most, most likely if you are in credit card debt, you probably don't even have the borrowing power to get another credit card to transfer the balance to a lower interest rate card. So yeah, like, so you can settle with banks. And now a lot of banks are dead and tax time is coming up. So banks settle tremendously during tax time, like they bank on that time. So now's the time to try to, you know, come up with a conclusion on how you're going to settle your balances and, you know, rectify it like your, your habits. But yeah, you can settle, you can't settle, but you got to know that you, you will have to pay it.

[Co-host]

Yeah, I actually went through that as well. Yeah. Reached out to a bank. It was, I think at one point I was late or something. I think I had utilized the credit card to the max. Then they, I was late and they raised the interest rates from like 19. This is like my, my college credit card. It went up to 29%. Then it became just ridiculous. I looked at the payoff date, it was like, it seems crazy now, but it was 2035 and this is like the year 2000. I'm like, House? Yeah. I'm like, there's no way this is going to happen. So then I called and they consolidated down to a point where I had to pay it off, but I just had to make sure I paid six consecutive payments or seven. Something at the same time.

[Financial Expert]

Yeah. Usually it's like six to nine months.

[Co-host]

Yeah. Yeah. So when it comes to things like that, when we're trying to pay off debt, because there's been different strategies and I wondered if you have one, right? Is it, do I pay the car that has the highest usage or do I pay the one that has the least usage? So I pay that off and then I work my way. Like a snowball effect. Like what's your, what's, what's your thoughts around that?

[Financial Expert]

So that's a great question. I, I do like the snow. So if your goal is to just get rid of your credit card debt and you don't really care to, to raise your credit score at this time, if you're not trying to use your credit, then the snowball effect is probably the most effective. Get the credit card with the highest interest rate, pay it down, and then work your way down. Right. However, if you are still trying to use your credit and want to grow your credit while you are paying down your utilization, then, then I personally recommend look at any card that has A utilization over 48%. Tackle those first. If you can get all of your cards under 48%, then you don't have what's called the max out penalty on your credit score. Meaning when you apply for credit, it's not showing that you have a card that's maxed out. Right. People think maxed out is 100% after 48%. Banks are looking at you like you have a maxed out card. So get all of your cards over 48%, under 48%. Then the next tier that you should aim for is under 30. So once you get all the cars under 45, work, work to get them under under 30 and then you just work your way down. If you care about Your credit score,

[Co-host]

what's the penalty at 48, is it?

[Financial Expert]

Yeah. Oh, points for sure. So basically, depending on how many cars, any cars that you have over 48 and depending on the score that they're looking at, I'll say homes, I'll use the mortgage scoring every card over 48% you're going to, you basically should. Minus 15 points per card from, from your score. And also if you are, if you have cars that are on or 30 to 45 or 30 to 47%, you pretty much need to mat. Or you need to subtract about 10 points per car. Right. Mortgage points. So, so yeah, the 48% when it comes to credit cards is showing that you're maxed out. Right. So get all of your cars under 48% then get them under 30% and then, you know, work your way down if you care about your score. But if you just are concerned with reading yourself of credit card debt the, you know, as fast as you can or cheap, the cheapest that you can, then yeah, the snowball effect is the, is probably the one that makes the most sense because the interest does continue to build, of course, on credit cards.

[Host]

So what about business credit? What's the difference between personal credit and business credit as far as how it's looked at for your credit score and how you get it and stuff like that?

[Financial Expert]

Yeah, so most business, most business credit cards or loans are not solely based. It's not based on your personal credit score. It's based on like your business profile score. And so there is a way to build your business score, but it is different and separate from like your personal credit score. What I tell everyone, make sure because you. I find a lot of people, especially in the industry that will only care about their business score, but then like just don't care about their personal score, which to me it's backwards. If you have great credit score, personal credit score, then it also sets you up to have and build great business credit easier. Like you don't, you're not. I have never had any of those net 30 accounts that people recommend. I don't, I don't deal with all of that. But I do have a lot of business credit extended to me simply by using my personal credit. People always say, like, you don't want to pg your personal credit. I mean, I personally, I do not subscribe to that theory. If I have great personal credit, you absolutely can. Can, it can. I can definitely vouch for my business credit with my personal credit because number one, lower interest. Like if you are Just going solely off your business credit profile, you're going to pay higher interest for pretty much everything. If you pg it, most of the cars that pg you're it's lower interest.

[Co-host]

PG personal guarantee.

[Financial Expert]

Personal guarantee. Yeah, yeah, yeah. And so also building, establishing personal relationships with companies like we talked about American Express, that's the, like you can get an Amer, you have an American Express personal card. Now you can get an American Express business card. Same goes with Chase. Same, same, same goes with most of the big banks. So yeah, I personally build business credit on the back of my personal credit and that does not mean that they're reporting on my personal credit profile. It just means that once I, when I applied for that account they looked at my personal credit and I have no problem with that because it. Good. Right.

[Co-host]

So I wonder from, from that aspect, when they look at your personal profile and your business profile, do inquiries work the same? Because I know a lot of new businesses will apply for new credit cards and so do they look at the same and how does that work? Are they negative? Are they derogatory? If you have a certain amount within a year.

[Financial Expert]

So are you referring to like if they do, if you do pg it and they do run your personal credit and it's for a business account, are you saying does those.

[Co-host]

Well I know if I apply for like five credit cards, which I wouldn't but business or personal, a personal first. Okay. So if I would look at as too many inquiries within a certain amount of time, right. If I have a business and I'm applying for credit cards, do those inquiries. Does it, is it looked at the same?

[Financial Expert]

No, it, it is, it isn't looked at the same when it comes to business because most of the times like the funding requirements are different and you know, but however, when it comes to your personal credit, credit card increase, way more than installment increase. So if you're applying for a car, you can apply like if you go to a car like you know, they'll pull, they'll run your credit like 20 times. For most people, if you don't come already with your finances, those are not counted individually. A lot of people freak out when that happens. But if you are doing, if you're applying for installments loans within a 14 day time frame, there is something that's called deduplication which all increase of the same manner will be basically they're, you're only going to be affected at the weight of one. You'll see all of them on your credit profile, but they're not all individually Impacting you. Now, when it comes to credit cards, they're the worst type of increase because they, every single credit card inquiry does impact you the same. But I mean, here's the thing. Increase are only worth up to 55 points. So I tell people all the time, people worry about increase more than they worry about payment history, credit utilization, credit age. And it's just like you should not be trying to save or protect your credit increase more than you are building credit. Like, because a lot of people will not build credit because they're scared of increase. And it's just like, so you're going to, you care more about 10% of your credit profile than collectively 75% of your profile. That doesn't make sense. When you're building credit, you're going to get increase. I, I don't, I don't care about increase ever. Because if you have a great credit profile, they will never affect you. There has never in the history of ever where you were was someone denied solely for increase. And people, people convince themselves that the increase is what caused the denial. Like, no, you were denied because you have a, a late payment or X, Y and Z. A bank is not going to deny you solely because of an inquiry. If your credit profile qualifies for the card or account, they will be, they will be crazy. A bank wants you to, you know, of course borrow the money from them. And if you are denied for an inquiry, you can always get a reconsideration.

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