Ramit Sethi compares $50,000 in credit card debt at 27% APR to the same amount in student loans at 4% APR. The credit card costs $1,000 a month in interest alone, while the student loan costs $167. Prioritize debt by interest rate, not balance.
Treating all of your debt the same is a very expensive mistake. $50,000 in credit card debt at 27%, for example, is a completely different problem than $50,000 in student loans at 4%. A credit card at 27% is costing you over $1,000 every single month in interest. Your student loan at 4% only costs you $167. Same balance, but the interest rate is the difference. And that difference costs you over $10,000 a year.
