Ndubuisi Egwim points out a math problem most people miss: carrying credit card debt at 25-30% APR while chasing investment returns of 8-12%. He uses a £20,000 property investment example funded by credit card debt at 27% to show why this doesn't work. Mortgage debt is different, but high-interest credit card debt should come first.
Imagine you've got a credit card that is charging you 27% interest, and you're simultaneously searching for an investment that might make 8%, 10%, even 12%. Think about what's happening. You're virtually guaranteeing somebody else that you pay them 27% while hoping somebody else gives you 10%. The math is not mathing. I've genuinely seen versions of this, and most people don't even think about it. They don't even know how high their credit card interest is. Somebody tells me, Andy, I've put £20,000 into this property development my friend is doing, and they're going to pay me 10% a year. Okay, fantastic. Then we discover they've also got about £20,000 or more sitting on credit cards charging 25%, 27%, sometimes 30% plus. That makes little mathematical sense to me. I don't know what you think about it. Tell me in the comments why people would do that. Now, an important qualification. Not all debt is the same. And I'm not saying everybody with a mortgage must just quickly rush and pay it off before investing.
