Turning to credit cards because of financial hardship is one thing, however, Buffett says some people use credit cards as “a piggy bank to be raided.”
During the Berkshire virtual shareholders meeting, Buffet gave a personal anecdote about a friend who came into a windfall and asked for advice on what they should do with it. The friend also had credit card debt at an 18% interest.
Buffett believes that paying off credit card debt that is accumulating interest at an 18% rate is just as good of an investment as buying stocks that give you an 18% return. The difference is that paying off the debt is more freeing and ultimately more beneficial since you will also see improvements in your credit score. An improved credit score gives you more freedom and access to financial opportunities.
When credit card debt becomes overwhelming, a good first step to getting rid of it is to roll it into a debt consolidation loan. You’ll simply put your bills into one payment and cut interest costs. This will help pay off the debt faster and make it easier to keep track of and manage.
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The coronavirus crisis has devastated entire industries such as retail, restaurants/entertainment, and travel.
