What is High-interest debt?
High-interest debt is borrowing that charges a rate well above what savings or typical investments might earn, such as most credit card balances, store cards, overdrafts and payday loans. There is no official cut-off, but rates in the high teens and above are usually counted.
Why High-interest debt matters
Paying it off earns a certain return equal to its rate, which is very hard for any investment to beat reliably.
Related terms
Lessons that use this term
- Pay off debt or invest? Compare the rates
- How to start investing, step by step
- How much should be in an emergency fund?