Clear revolving credit card debt first. Cards commonly charge around 3–3.5% a month (roughly 36–42% a year), while a long-term equity assumption is only about 11–12% a year. No investment can reliably outrun that gap.
Say you carry ₹1,00,000 on a card at 3.5% a month and pay nothing for a year. With monthly compounding, the balance grows to about ₹1.51 lakh, an effective rate of over 50% a year.
If you instead invested that ₹1,00,000 at an assumed 12%, you would have about ₹1.12 lakh. Returns are never guaranteed, but even if the assumption holds, you lose roughly ₹39,000 by choosing to invest. Paying off the card is a guaranteed saving at the card's rate. Investing is an uncertain gain.
Not all debt is equal. These are indicative ranges only. Check your own statements.
| Debt type | Typical interest (indicative) | Priority |
|---|---|---|
| Credit card revolving balance | 36–42% a year | Clear first |
| Personal loan / app loans | 11–24% a year | Clear next |
| Car loan | 8–11% a year | Compare with investing |
| Home loan | 8–9.5% a year | Usually keep, invest alongside |
| Education loan | Varies, often with tax benefit | Case by case |
The rule of thumb: if a debt costs clearly more than your assumed long-term return (about 11–12% for equity, 6–7% for debt funds), repay it first. If it costs less, investing in parallel can make sense. See our note on [prepaying a home loan](/blog/prepay-home-loan-or-invest) for that case.
Habit matters. People who pause all investing for years often find it hard to restart. A small SIP, say a few percent of income, costs little against the debt payoff but keeps you in the system. Once the card is cleared, the freed-up payment becomes your first step-up.
In a goal plan, the freed monthly amount can be assigned to the goals that matter most, with the equity, debt and gold mix de-risking as each goal date nears. Everything here is educational. For your own numbers, check with a qualified adviser.
Q. Should I stop my SIP completely to repay a credit card?
A. If you are revolving a balance at card rates, repay aggressively first. Many people still keep a small SIP to protect the habit. Pausing fully is a personal call, not a rule.
Q. Is paying only the minimum due okay?
A. The minimum due keeps the account in good standing, but interest keeps compounding on the remaining balance. It is the costliest way to carry a card.
Q. What if I pay the full statement every month?
A. Then there is no revolving interest, and the card is simply a payment tool. In that case there is no reason to delay investing.
Q. Does a home loan count the same way?
A. No. Home loan rates are far below card rates and may carry tax benefits under current rules. Confirm the year's limits or check with a CA. Investing alongside is usually reasonable.
Plan Our Future · AMFI-registered Mutual Fund Distributor (ARN-360754). Mutual Fund investments are subject to market risks, read all scheme related documents carefully.