Why Your Investment Fund Will Never Outpace Your Credit Card Interest Payments

Your investment portfolio hit double digits last year, but somehow you’re not making any headway paying off thousands in credit card debt. Why? With average credit card interest rates soaring to 24.20% in May 2025 and continuing to climb, even the best investment strategies won’t pull you out of the financial quicksand.

You have to “prioritize cash flow and stability—Do you have an emergency fund? Do you know your burn rate if income stops?” Stoy Hall, CEO and founder of Black Mammoth, told Investopedia. “If not, park the investment convo for now. But if you’re stable, this is when wealth is built. ”

The Unforgiving Math of Credit Card Debt

According to an Investopedia analysis of hundreds of current credit card offers, credit card interest rates have reached unprecedented levels, with the average rate hitting 24.20% in May 2025. These aren’t penalty rates for nonpayment—they’re the new normal (the chart below provides data on credit cardholders).

The math involving high-interest debt is just devastating for your bottom line. Let’s say you have a $5,000 credit card balance at 24.5% APR and you make the minimum payments: our analysis shows you’d spend 17.3 years paying off the debt, ultimately expending about $14,000 total—almost $9,000 in interest alone, or $1.80 in interest for every dollar you originally borrowed. Even worse, during the first year, only $546 is applied toward reducing your actual debt, while $1,254 is absorbed by interest payments.

“Having a thorough understanding of your debt is a valuable tool that isn’t discussed enough,” Brenton Harrison, a certified financial planner and founder of New Money New Problems, told Investopedia. “Knowing key numbers like your interest rate, repayment terms, and viable alternatives can help you optimize your debt terms and speed up your repayment timeline.”

Why Even Great Investment Returns Fall Short

The S&P 500 has delivered an average annual return of just under 10% over nearly a century, with recent 10-year averages reaching 12.2%, according to our review of TradingView data in late May 2025.

These are impressive numbers that have created substantial wealth for long-term investors. But here’s the flaw in any “invest instead of paying off debt” logic: investment returns aren’t guaranteed and they’re taxable, which means you’ll need to make even higher returns to make up for what you pay Uncle Sam.

The U.S. Securities and Exchange Commission‘s advice to investors is blunt on the matter: “Virtually no investment will give you returns to match [even] an 18% interest rate on your credit card.”

Even Warren Buffett Couldn’t Invest His Way Out of This

The investment-versus-debt math becomes even more lopsided when taxes enter the picture. Reviewing the chart above, to beat a 24.5% APR through investing, you’d need pre-tax returns that would make you a star at a hedge fund.

Even Warren Buffett‘s legendary average returns of about 20%, once you account for taxes, wouldn’t be enough to cut it.

But Wait—It Gets Worse

While financial gurus love discussing how compound interest builds wealth through investing, the same mathematical force works relentlessly against debt holders. Credit card interest accrues daily, with issuers typically dividing your APR by 365 days and applying this rate to your average daily balance. For the example above of $5,000 in credit card debt, that would mean $3.35 added each day onto your debt.

During your first five years paying off $5,000 at 24.5%, you’ll pay $9,000 total but still owe $2,833—the compounding works against you hardest when your balance is highest.

The Bottom Line

With credit card rates hovering around 25%, the mathematics strongly suggest putting your money toward paying your credit card debt before investing. While missing out on potential market gains is painful, paying down your debt guarantees you savings—unlike the stock market.