A balance of $1,000 on a credit card is going to cost the average card holder $178 a year in interest alone. That means that not a penny of that $178 goes toward paying off your balance. This tends to make people feel a little sick, so I’ll pause here if you need a break…
Ok good you’re back. Here’s a little chart to show how much the average card holder is paying in interest per year!
Those are HUGE numbers! Here’s two things to think about…
- The stock market could earn you a return each year depending on how aggressive you are invested.
- A credit card costs you on average anywhere from 14-20% a year depending on your credit score.
Let that digest for a minute…
My point is that if you owe any money on a high interest credit card then that should be your priority over investing. The only time there is an exception to this rule is if your employer matches any contributions you make to a retirement plan. High interest debt can be a wealth killer so pay off that credit card before you start investing in the stock market. Paying off high interest rate debt (don’t confuse this with lower interest rate debt like a mortgage) is almost always going to be the best place to put your money. Once you have paid off that credit card debt, then begin your career as an investor!
*17.8% is the average interest rate in 2019 for credit cards according to https://www.bankrate.com/credit-cards/current-interest-rates/
All investing involves risk, including the possible loss of principal. When redeemed, stock shares may be worth more or less than the original amount invested.