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100 FAQ's on Basic Finance

Module Units

Pay off credit card debt or Invest?

Credit card debt is the most expensive form of borrowing.

 

When you purchase using your credit card, the interest charged is 2-3% a month (or 24-36% a year). Credit card companies charge high-interest rates to protect themselves if you accumulate a lot of debt or you never pay them back.

 

Hence, they come with high-interest rates and a small minimum balance that needs to be paid every month, making you unable to save. 

 

Therefore, paying off the credit card is a better decision than investing the same amount as a decent investment would fetch you 12-18% returns but beating a 36% interest rate with this investment could be very difficult.

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Units 24/101