🎯 In 30 seconds: Compare loans by APR for the same term. Look up typical rates from the Federal Reserve’s monthly G.19 release before you shop. Paying off a debt is a guaranteed return equal to its rate, which is why high-rate card balances are commonly cleared before saving beyond a small emergency fund.
Where to look up typical rates
The Federal Reserve’s G.19 Consumer Credit release is generally issued on the fifth business day of each month. Its “Terms of Credit” table shows average APRs for credit card plans (all accounts, and accounts that were charged interest), 24-month personal loans and 60- and 72-month new car loans at commercial banks.
For scale: the October 7, 2026 release showed preliminary August 2026 credit card rates of 21.19% for all accounts and 22.36% for accounts assessed interest. Check the current release for newer figures. For savings rates to compare against, see Today’s Rates.
Credit cards
Most cards quote an APR but charge a daily rate: the APR divided by 360 or 365, applied to each day’s balance, with the interest added to the balance. If you pay the full statement balance by the due date, most cards charge no interest on purchases.
Worked example. A $5,000 balance at a 22% APR costs about $5,000 × 22% ÷ 365 × 30 ≈ $90 in a 30-day month.
Auto and personal loans
These are usually fixed-rate loans with a set payment. Compare by APR, which includes fees such as an origination fee, and by total cost. A longer term lowers the payment but usually raises the total interest. Ask for the APR, the term in months, the payment and any prepayment penalty for each offer, and line them up.
Mortgages: rate, APR and points
A mortgage’s APR includes the interest rate plus points, broker fees and other charges to get the loan, so it is usually higher than the rate. One discount point costs 1% of the loan amount and lowers the rate by an amount that varies by lender.
Worked example (illustrative rates). $300,000 over 30 years at 6.00%:
| Monthly payment (principal and interest) | $1,798.65 |
| First payment: interest | $1,500.00 |
| First payment: principal | $298.65 |
| Total interest over 30 years | about $347,515 |
That split is amortization: early payments are mostly interest, and the principal share grows each month. If one point ($3,000) cut the rate to 5.75%, the payment would drop to $1,750.72, saving $47.93 a month. The point pays for itself after about 63 months, a bit over five years. Sell or refinance before then and the point cost more than it saved.
Pay off debt or save?
Paying down a balance “earns” its interest rate, with no risk and no tax. Savings interest is taxed. So compare the debt’s rate with your savings rate after tax.
| $5,000 for a year | Result |
|---|---|
| Pay off a 22% card | About $1,100 of interest avoided |
| Save at a 4.00% APY, 22% bracket | About $156 earned after federal tax |
- Debt rate well above your after-tax savings rate: paying it down usually comes out ahead.
- Debt rate below it (some older mortgages or car loans): saving can come out ahead, though being debt-free has value of its own.
- Keep a starter emergency fund either way, so a surprise bill does not go back on the card.