Legendary investor Warren Buffett , ranked as the world’s fourth richest man, is known for business wisdom he generously doles out from his own investing experiences and insights.
One of his latest tips is directed to those who incurred credit card debts before the corona virus pandemic broke out.
To such credit card holders, here is what Buffett has to say.
“If you have the means to pay down your balance, it’s better to do it sooner rather than later.”
“If I owed any money at 18 per cent,the first thing I’d do with any money i had will be to pay it off. Its going to be way b etter than any investment idea I get.
By paying off the balance, one would save more money on interest than any return one could get
The average credit card interest rate is about 16% as of May 2020.
“You can’t go through life borrowing money at those rates and be better off,” Buffett said.
Interest can add up quickly if you carry a balance. We’re living during very rocky economic times with millions … losing income and filing for unemployment benefits, so you might not have the means to to tackle your debt. That’s OK — financial experts say that it makes sense to hold off on paying it down if you’re struggling financially.
Right now, your main priority should be to cover your bills and buy necessities. If that means putting your debt repayment plan on hold to free up cash, do that. Many banks are offering customers payment deferrals and fee waivers to help ease some of the burden. After all, if you use up your savings to pay off your balance and get out of the red, you could wind up back where you started a few bills later if you don’t have an emergency fund.
But if you have a well-funded emergency savings account, and you can afford to cover living expenses and tackle your debt at the same time, keep chipping away at your balance as much as possible. And once you’re debt-free, get in the habit of making payments in full so you never have to owe interest again.