September 6, 2021

Should you be saving for retirement if you have credit card debt?

Should you pay off credit card debt or invest? The answer is complex, but here's what you need to know to get started today

10 min read

Qoins Staff


If you ask this question to ten financial advisors, we can bet our money that you will be receiving ten different kinds of advice. That is actually good. None of these experts are wrong. Personal finance is something that can be dealt with in millions of different ways and all of them are right and legit. Experts help you with more data and opinion - it is ultimately your decision. So here are a few markers and checkboxes you should consider thinking about before choosing between credit card debt repayment and retirement fund savings.


Do a sound analysis of your debts

When we say a sound analysis, we mean a full-scale "all aspects considered" kind of examination. Ask yourself these questions.

  • How many debts do I have?
  • What are the interest rates of each?
  • Which ones should I be done with as fast as possible? (We recommend you to include the ones with two-digit interest rates in this list. Credit card debts can be counted in)
  • How long is it going to be until I am debt-free?
  • Are there any debts I can feel less worried about because they have a very long payment period and the deductions are too little to bother about?
  • Which of my debts can be considered as "a matter to plan and worry about" kind of debt?
  • Which among these debts should I positively get rid of before planning a retirement deposit plan?
  • How much can I set aside every month for debt repayment?


The answers will help you get a clearer picture of your current liabilities. Once you have had a good overall view, you can take a few pragmatic decisions. Here are a few tips.

  • Repay that credit card debt right away. Interest over interest is a dangerous affair. It has the ability to eat up a lot of your earnings if you are not regular with your payments every billing cycle.
  • Is there a student loan lingering at the back of your mind while you are planning to pay off your car loan in a short time frame? You might want to lengthen the time duration of your car loan. Paying two loans at once and not bearing the prick of either can be possible if you reduce the outgoing installments to smaller sums. That way you will be living comfortably without worrying about too much money draining away from your monthly earnings.
  • The trick is to find the sweet spot between paying interest and not letting debt rule a large part of your life. How long vs how much. Your decision should be such that neither gets the upper hand but both are managed well.

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When do investments come into the picture?

We can picture you asking yourself if you have made enough investments to retire early and live a less stressful life. We can also picture you brainstorming with ten investment company brochures trying to make your mind about which one to choose. As personal debt, personal investment is a completely subjective topic. But here are a few pointers we would like you to pay attention to.


Is there a 401k scheme in the company that I work?

If there is, you should waste no time pumping a bit of money into your company account. Your company will add up extra money as a match- this is in return for you trusting them with your money and being loyal to them for years. All firms have different mechanisms in their 401k account schemes. But we are betting our money that most of them are incredibly profitable for their employees. You should try inquiring into this.


If you have high-interest debt, like a credit card, those types of debt should be prioritized before investing. But prioritizing doesn’t mean you can’t make smaller contributions. Let’s say for example at the end of the month you have an extra $500 to go towards your debt and savings goals. In this case, putting $400 towards your high-interest debt, and $100 towards your brokerage is a fairly smart bet. Compounded over time, you will have a solid start to your investing career while also aggressively paying down your debt. 


Keep your eyes and ears open

If you could have invested in crypto a year ago, your money wouldn't have doubled. It would have become twelve times. Isn't that mind-boggling? If you are constantly on the lookout for acquiring assets and properties whose value multiplies fast and which show low price volatility, you can make money. It does not matter if you are still paying off your debts. The myth that you need a large sum of money to start investments is what it is - a myth. So look for a good plan, and invest small. Invest slow but start early.

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