Billionaire Warren Buffett has advised against using credit cards as a piggy bank. He emphasized the importance of paying off high-interest debt.
What Happened: During the Berkshire Hathaway’s annual shareholder meeting in 2021, Buffett shared his personal finance advice and suggested that people should avoid using credit cards as a “piggy bank to be raided.”
Buffett shared an anecdote about a friend who had recently come into some money. When she asked for advice on what to do with the funds, Buffett’s first question was about her credit card debt.
He stressed the importance of paying off high-interest debt, stating, “If I owed any money at 18%, the first thing I’d do with any money I had would be to pay it off. I think people should avoid using credit cards as a piggy bank to be raided.”
“Because paying it off is gonna be way better than any investment idea that I’ve got. And that wasn’t what she wanted to hear,” he added.
Buffett pointed out that the average credit card interest rate, according to WalletHub, is around 15% for existing accounts. He asserted that paying off this debt would be more beneficial than any investment idea he could offer.
Why It Matters: Statistics from the Consumer Financial Protection Bureau reveal that by the end of 2018, total credit card balances were around $900 billion.
With an average debt of about $6,200 per consumer, Buffett’s advice is more pertinent than ever. The high-interest rates associated with credit card debt can significantly impact an individual’s financial health.
Buffett’s advice underscores the importance of prudent financial management and the need to prioritize debt repayment over other financial decisions.
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