Pay off debt or invest?

You have a debt interest rate and an expected investment return. One of them is higher. The crossover rate is the point where they are equal and the math flips from one winner to the other. Above it, paying off debt wins. Below it, investing wins. Most people have never heard the term before using this tool. That's fine. Just enter your two numbers and we calculate it for you.

Almost always yes. Credit card interest rates typically range from 18% to 28% APR. No commonly available investment reliably returns more than that. The crossover rate for credit card debt is extremely high, making debt payoff the clear mathematical winner in nearly every scenario.

This is where the crossover rate matters most. If your mortgage rate is 3% to 4%, the historical stock market average of ~10% makes investing the likely winner. But if your mortgage rate is 7%+, the gap narrows significantly. Taxes matter here too. Mortgage interest may be deductible, which lowers your effective debt cost. Use the optional tax fields above for a more precise answer.

Student loan rates vary widely, from 3% for older federal loans to 8%+ for private loans. Federal student loan interest is tax deductible (up to $2,500/year), which lowers your effective rate. Enter your actual rate above and toggle the tax deduction option for a precise comparison. If your rate is low, investing in your employer's 401(k) match first is almost always the better move.

Most financial planners draw the line between 6% and 8%. Debt above that range almost always warrants paying off first. Debt below it, like a 3% mortgage or a 4% federal student loan, is cheap enough that investing often wins over time. But that general rule ignores your specific tax situation and risk tolerance. The crossover rate this calculator gives you is your personal tipping point, not a rule of thumb.

Yes, and that's an important nuance the math alone doesn't capture. Paying off debt gives you a guaranteed return equal to your interest rate. Investing gives you an expected return based on historical averages, but any given year can be negative. If certainty matters more to you than maximizing expected value, that's a valid reason to lean toward paying off debt even when the math slightly favors investing.

Always take the full employer match first. It's an immediate 50% to 100% return on your contribution, which no debt payoff can beat. After capturing the match, use this calculator to decide what to do with the remaining extra money. The match is free money; the crossover rate applies to the dollars above and beyond that.