Could one person with a card with no spending limit pay off everyone's debt?
The problem would not only be that of Kyle but also that of American Express. When Kyle pays by credit card, American Express pays the bills out of their pockets on his behalf and then forwards the bill to Kyle. The issuer of a credit card takes the risk that the holder of the card won't pay the credit card bill. In practice there are safeguards in place which prevent a company like AE to pay such huge sums in one day through an automated process. Credit card companies have sophisticated algorithms to determine unusual spending patterns and block any transactions which appear unusual. Also, after a few billions their bank will likely block them and prevent them from paying any more bills. But let's play along and pretend these safeguards wouldn't exist. That means after Kyle's spending spree, American Express will be trillions in debt, with their main debitor being a 10 year old boy who won't ever be able to pay. Kyle will have to declare personal bankruptcy. There are various variants of bakruptcy in the US, but they basically all boil down to him paying everything he can pay (not much considering that he is 10) and then defaulting on his debt. Afterwards he is debt-free. That means the debt is now that of American Express. American Express will not be able to pay that debt with their bank(s) either, so they will have to declare bankruptcy and default on their debt too. This domino effect passes the burden on to the banks which can not carry a trillion-level debt either. A bank going bankrupt is a serious issue because it means they can not pay back any of the money in the saving accounts hold by companies or private people with them. So the problem would return to those people Kyle wanted to help in the first place. Also, the collapse of one bank will often result in the collapse of further banks, resulting in a collapse spiral destroying the whole world-wide finance system. Nothing would be gained.
"Debts do not inherit to the children. You are absolutely not liable for your parent's debt, in any way whatsoever. **  Collection agents will lie about this; tricking you is their job, and your job is to tell them Heck no, do I look like an idiot? When a person dies, all their personal assets (and debts) go to a fictitious entity called the Estate.  This is a holder for the person's assets until they can be dispositioned finally.  The estate is managed by a living person, sometimes a company (law firm), called an Executor.  Similar to a corporation which is shutting down business, the Executor's job is to act on behalf of the Estate, and in the Estate's best interest (not his own).  For instance he can't decide, in his capacity as executor, to give all the estate's money to himself.  He has to loyally and selflessly follow state law and any living-trust or wills that may be in place. This role is not for everyone.  You can't just decide ""la la la, I'm going to live in their house now"", that is squatting.  The house is an asset and someone inherited that, as dictated by will, trust or state law.  That has to be worked out legally.  Once they inherit the house, you have to negotiate with them about living there. If you want to live there now, negotiate to rent the house from the estate. This is an efficient way to funnel money into the estate for what I discuss later.** The Estate has assets, and it has debts. Some debts extinguish on the death of the natural person, e.g. student loans, depending on the contract and state law. Did you know corporations are considered a ""person""?  (that's what Citizens United was all about.)  So are estates - both are fictitious persons. The executor can act like a person in that sense.   If you have unsecured debt, how can a creditor motivate you to pay?  They can annoy and harass you.  They can burn your credit rating.  Or they can sue you and try to take your assets - but suing is also expensive for them.  This is not widely understood, but anyone at any time can go to their creditors and say  ""Hey creditor, I'm not gonna pay you $10,000.  Tough buffaloes.  You can sue me, good luck with that.  Or, I'll make you a deal.  I'll offer you $2000 to settle this debt.  What say you?  And you'll get one of two answers.  Either ""OK"" or ""Nice try, let's try $7000.""  If the latter, you start into the cycle of haggling, ""3000."" ""6000."" ""4000."" ""5000. ""Split the difference, $4500."" ""OK.""  This is always a one-time, lump sum, one-shot payoff, never partial payments.  Creditors will try to convince you to make partial payments.  Don't do it.  Anyone can do that at any time.  Why don't living people do this every day?   How about an Estate?  Estates are fictitious persons, they don't have a ""morality"", they have a fiduciary duty. Do they plan on borrowing any more money? Nope. Their credit rating is already 0. They owe no loyalty to USBank. Actually, the executor's fiduciary duty is to get the most possible money for the assets, and settle the debts for the least.  So I argue it's unethical to fail to haggle down this debt.  If an executor is ""not a haggler"" or has a moral issue with shortchanging creditors, he is shortchanging the heirs, and he can be sued for that personally - because he has a fiduciary duty to the heirs, not Chase Bank.  Like I say, the job is not for everyone. The estate should also make sure to check the paperwork for any other way to escape the debt: does it extinguish on death?  Is the debt time-barred? Can they really prove it's valid?  Etc.  It's not personal, it's business.  The estate should not make monthly payments (no credit rating to protect) and should not pay one dime to a creditor except for a one-shot final settlement. Is it secured debt? Let them take the asset. (unless an heir really wants it).  When a person dies with a lot of unsecured debt, it's often the case that they don't have a lot of cash lying around.  The estate must sell off assets to raise the cash to settle with the creditors.  Now here's where things get ugly with the house.  ** The estate should try to raise money any other way, but it may have to sell the house to pay the creditors. For the people who would otherwise inherit the house, it may be in their best  interest to pay off that debt. Check with lawyers in your area, but it may also be possible for the estate to take a mortgage on the house, use the mortgage cash to pay off the estate's debts (still haggle!), and then bequeath the house-and-mortgage to the heirs.  The mortgage lender would have to be on-board with all of this.  Then, the heirs would owe the mortgage.   Good chance it would be a small mortgage on a big equity, e.g. a $20,000 mortgage on a $100,000 house.  Banks love those." I concur with pretty much what everyone else said. Let me break it down in a concrete plan of action.  First, though, note that at least the minimum payments for the credit cards needs to be on this list of fixed expenses. Also, you have $868 remaining in a normal month -- food could be $500 or more easily for a family, so find out how much!  Adding in just those 2 things, and you're already at your max. And there are other expenses in life.   Ok, cutting from the top: DirectTv -- gone. Pure luxury, and between netflix, hulu and your   internet connection (hook your computer to the tv), there's no need   for it. $80 savings.  Cell phones -- you're already moving in the right direction, but not   far enough. In a financial crunch why does your stay-at-home wife have   a cell? Especially when she could just as easily use Google Voice for   free? Both plans gone, replaced by one of the prepaids @$45. $105   savings, total $186 savings.  529 plans -- Of course you want to save for your kids college, but it   doesn't help them for you to drown financially. Gone until your credit   card debit is too. $50 savings, $236 total. Ok, we're already up to $236/month in savings just cutting items you don't need. That probably gets you back into the black, but why stop there?  Trimming expenses  Electric -- ok, I know it's summer, but can you cut this back? Is the   thermostat set as high as you can comfortably bear? Are you diligent   in turning of lights, especially incandescent? Do you turn off your   computer when you're not using it? See if you can get the Electric   down by 10%. That's $20/month savings. Doesn't seem like much, but it   adds up.  Gas -- same with gas. Do you have gas hot water? If so, cut shower   length. Saves on water too.  Food -- this one you didn't list. But as I said, you could be spending   $500 or $600 a month easily for a family. Do you guys plan meals, and   thus plan shopping trips? If not, do it. You'll be surprised how much   you can save. Either way, 10% reduction should be doable. That's   $50/month. If you don't plan now, 20% is within reach -- that's   $100/month. Ok, that may have added as much as $130 or so. If so, you're now up to $366/month savings. That's like a 15% raise.  Simply cutting, however, is only half the plan. You want to improve your situation, so you can get the Directtv back (assuming you'll even want it at that point), and the wife's cell phone, for starters.  To do that, you've got to nail down that debt. I figure you've got minimum $567.23/month in debt payments. That's not including your mortgage, and including an assumed $80/month minimum credit card payments. You pay over 21% of your take-home to short term and consumer debt!  Yea, that's why you're hurting. Here's what you do  In both cases, apply the extra payments entirely to one balance at a   time. Pick either the smallest balance (psychologically best because   you quickly see a loan & it's payment dissappear), or the highest   interest (mathematically the best). Roll each regular payment that's paid off into the extra debt payments. You didn't list total debt balances, but you did say you had $4000 in   credit card debt. Applying an extra $250/month to debt (out of that   $366 savings), plus two extra paychecks of $1300 each, is $5600/year   paid off. In under a year, you could have those credit cards paid off, and likely that window loan too. Start the 529s again, but keep going   paying down the rest. When you have the car paid off, bring back the   wife's cell (you and I both know that's going to be #1 on the list :)    ), then finish off those student loans.  Then bask in the extra $567/month - 21% of your income - you'll have in sweet, sweet green cash! "Congratulations on recognizing your problem and getting serious about paying down your debt. That's the first step. If you have a loan with 80% interest, yes, get that paid off as quickly as possible. Much better to be paying even the outrageous 20% on a credit card than the astounding 80%. As others have noted, if you can get a consolidation loan or refinance that 80% to something more realistic, do it and do it as soon as possible. Heck, if you have the credit limit, use the credit card to off the 80% loan. 20% on a credit card is better than 80%. Of course you may not have enough credit limit to do that. Cash-back rewards are nice if you are paying off the credit card balance each month. But in your case, you're not. 25% with a 2% cash back reward means you're still paying 23% the first month and 25% every month after that. That's worse than 20%. Remember you pay the interest on your balance every month that you don't pay it off, while a cash-back is a one-time thing. So if you're not going to pay off the balance, AT BEST a cash back reward could be effectively subtracted from the interest rate. 20% with a 2% cashback is effectively somewhere between 18% and 20%. If you're comparing 20% with 2% cashback to 19%, could be complicated to figure out which is better. But it's clearly worse than anything more than 20%. Besides that, you don't say what your total debt is in relation to your income. If you have a lot of debt, I'd say first thing is to figure out what you can do to cut your expenses. Lots of things that people call ""fixed expenses"" aren't really fixed at all, they just take some effort to cut. Like if you have a big expensive house and you're paying a large mortgage, you can (probably) cut that by selling the place and moving to a cheaper house. (I say ""probably"" because the housing market may make it impossible to sell for enough to improve your situation.) If you have large heating bills, you can turn the thermostat down and get used to wearing a sweater around the house. Etc.  Final note: I've talked to a fair number of people with debt problems, and I often hear them say, ""Yes, I really need to cut my spending and start paying off these debts. And I intend to ... right after I buy this one last thing that I really really want."" But of course after that there's one more vital purchase, and then another, etc. Avoid falling into this trap." "Allen, welcome to Money.SE. You've stumbled into the issue of Debt Snowball, which is the ""low balance"" method of paying off debt. The other being ""high interest."" I absolutely agree that when one has a pile of cards, say a dozen, there is a psychological benefit to paying off the low balances and knocking off card after card. I am not dismissive of that motivation. Personal Finance has that first word, personal, and one size rarely fits all. For those who are numbers-oriented, it's worth doing the math, a simple spreadsheet showing the cost of the DS vs paying by rate.  If that cost is even a couple hundred dollars, I'll still concede that one less payment, envelope, stamp, etc, favors the DS method. On the other hand, there's the debt so large that the best payoff is 2 or 3 years away. During that time, $10000 paid toward the 24% card is saving you $2400/yr vs the $500 if paid toward 5% debt. Hard core DSers don't even want to discuss the numbers, strangely enough.  In your case, you don't have a pile of anything. The mortgage isn't even up for discussion. You have just 2 car loans. Send the $11,000 to the $19K loan carrying the 2.5%. This will save you $500 over the next 2 years vs paying the zero loan down. Once you've done that, the remaining $8000 will become your lowest balance, and you should flip to the Debt Snowball method, which will keep you paying that debt off.  DS is a tool that should be pulled out for the masses, the radio audience that The David (Dave Ramsey, radio show host) appeals to. They may comprise the majority of those with high credit card debt, and have greatest success using this method. But, you exhibit none of their symptoms, and are best served by the math. By bringing up the topic here, you've found yourself in the same situation as the guy who happens to order a white wine at a wedding, and finds his Mormon cousin offering to take him to an AA meeting the next day.  In past articles on this decision, I've referenced a spreadsheet one can download. It offers an easy way to see your choice without writing your own excel doc. For the situation described here, the low balance total interest is $546 vs $192 for the higher interest. Not quite the $500 difference I estimated. The $350 difference is low due to the small rate difference and relatively short payoffs. In my opinion, knowledge is power, and you can decide either way. What's important is that if you pay off the zero interest first, you can say ""I knew it was a $350 difference, but I'd rather have just one outstanding loan for the remain time."" My issue with DS is when it's preached like a religion, and followers are told to not even run the numbers. I wrote an article, Thinking about Dave Ramsey a number of years back, but the topic never gets old." "It is possible to pay down debt (including interest) without issuing new debt money to pay for it. I think this is the heart of your question. Let me present a highly contrived example in which society has four people and one bank. Here is a bank with $100 in initial deposits. Total money supply in this society is $100. (We assume there is no currency circulating, since you're interested in debt money.) This bank lends out $90 to Bob at 1 year maturity and 10% APR. Bob spends this $90 with Charlie to buy raw materials. Charlie deposits $90 in the bank. The money supply just grew from $100 to $190. Bob does something with the raw materials and adds some kind of value, eventually selling the finished goods for $110. In our little silly economy, the only people who have money are Adam and Charlie, so we must assume that between the two of them they buy $110 worth of goods from Bob. Let's say Adam buys $60 and Charlie buys $50 -- the actual amounts don't matter. Bob deposits this money at the bank. Still $190 of money supply. At the end of 1 year, Bob instructs the bank to transfer payment from his deposit account to his loan account. The bank wipes clean his debt and the money remaining in Bob's account represents his return. Who is this David guy? He's the owner of the bank. He grosses $9 in interest from the loan to Bob, and he pays $5 to Adam as interest on Adam's deposit. The remaining $4 is the profit to the bank's owner. Money supply decreased from $190 to $100 after Bob pays off his loan. I realized after writing this, the one thing I left out is, ""where does Adam get $100 to start with?"" Presumably Adam starts off with some kind of currency, either fiat money or commodity money. (IOW, debt money can't be created out of nothing, it has to be expanded on top of some kind of currency.)" "Your use of the term ""loan"" is confusing, what you're proposing is to open a new card and take advantage of the 0% APR by carrying a balance.  The effects to your credit history / score will be the following:" "Would you run a marathon with ankle weights on?  It starts off as ankle weights, but then grows into a ball and chain as you dig yourself a little deeper each time you use your credit card (and then don't payoff the balance because ""something more important came up""). I would love for my wife to be able to be home and raise our son, but we simply can't afford to do that with the amount of debt we have. We are clawing our way out, and will pay off one student loan and a car loan, then start saving for a house and once we have that, we'll get back to debt reduction. Get debt free.  That's where we are headed.  Most of it is student loans at this point, but debt will take away your freedom to do whatever you like down the line.  It just increases your overhead in the long run." The right answer is use it, but use it responsibly. The point of the credit report is to prove to potential creditors that you are a responsible person who pays their bills on time. If you don't use the new credit card, you can't prove that. However, of course there is a limit. If you max out the card, you have only proven that you are irresponsible with credit. Try to stay around 50% of your max limit. More is O.K., but never go over 89%. Always pay your bills on time. Always. Not just this new credit card, but all bills. The best way to ruin your credit is not paying your bills. Even if you are having a dispute with a company, pay the bill anyway to save your credit and then dispute the situation and try to get your money back. Prove to creditors that they can trust you and you'll have an excellent credit score.