Finance

Good Debt, Bad Debt

Interest rates decide which is which.

Debt is a tool with a price tag: the interest rate. A 3% mortgage on an appreciating asset is very different from 22% revolving credit card debt.

Compare any debt's rate to your realistic investment return. Paying off 22% debt is a guaranteed 22% return — better than almost any market bet.

The avalanche method (highest rate first) is mathematically optimal; the snowball (smallest balance first) wins on motivation. Both beat doing nothing.