If you’re in your 50s and carrying credit card debt, you’re far from alone. Experian says that, as of 2024, Gen Xers owed an average of $9,255 on their credit cards.
Let’s say you’re 54 years old, roughly a decade away from retirement, and owe $41,000 on a handful of credit cards. That debt may be costing you a boatload of money beyond your principal. As of early April, the average credit card annual percentage rate (APR) is 24.23% — and if you don’t get ahead of your large balance, you could end up in a truly dire financial situation.
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That said, if you’re only earning, say, a $70,000 annual salary, you may only have so much money to allocate to your debt. Throw in some valid concerns about a recession — which may be the case in light of recent tariff policies — and you may be inclined to prioritize boosting your savings over paying down debt. That way, if you end up out of a job, you might at least manage to avoid adding to your debt.
Tariff policies have the potential to disrupt the economy and cost businesses money, and if companies can’t afford their payrolls, we could see a widespread increase in unemployment.
Tariffs also have the potential to cost consumers money, which could lead to a pullback in spending. In light of this, Goldman Sachs economists are putting the likelihood of a near-term recession at 45%.
But should your savings come first at a time when recession fears are high? Or should your debt come first? Here’s how to decide.
The case for prioritizing high-interest debt
The problem with letting credit card debt linger is that you can end up spending a lot of money on interest. If you owe $41,000 on your various credit cards and it takes you five years to pay off your balances, at a 24.23% APR, you’re looking at spending a little more than $30,000 on interest alone.
If you’re able to whittle down your balances a bit in the coming months, in addition to savings on interest, you may be looking at lower monthly payments later on in the year. If a recession hits at that point, your debt might be easier to deal with.
There are a couple of different tactics you can use to pay off credit card debt. The “avalanche method” has you tackling your debts from highest interest rate to lowest, while the “snowball method” encourages you to tackle your debts from smallest balance to largest.
Each has its advantages, and both can be effective. The avalanche method can save you more money on interest — which can go a long way when you’re dealing with expensive credit card debt. However, some people find the snowball method keeps them motivated by allowing them to enjoy small wins on the road to being completely debt-free. You’ll need to think about which method works best for you.
Another option is to see if you qualify for debt consolidation. If you move your credit card balances into a personal or home equity loan with a much lower interest rate, that could be a huge source of savings. And it could enable you to be debt-free sooner.
Read more: Want an extra $1,300,000 when you retire? Dave Ramsey says this 7-step plan ‘works every single time’ to kill debt, get rich in America — and that ‘anyone’ can do it
The case for prioritizing your savings
Paying off debt can be a source of savings. But if you’re worried about losing your job in the near future, you may want to prioritize your actual savings.
A U.S. News & World Report survey revealed that as of earlier this year, 42% of Americans are without an emergency fund. But if you don’t have savings to fall back on and you lose your job, you could end up getting deeper into debt — that is, if you’re even given that option.
If you already have $41,000 in credit card balances, you may be pretty maxed out. And if your credit cards are maxed out, chances are, your credit score isn’t in the best shape, which means you may not qualify for a new loan if you need one.
So, if you don’t have enough money in the bank to cover at least a three-month period of unemployment, you may want to focus on building some emergency cash reserves and tackle your debt afterward.
Once you’ve socked away enough money to float you for three months, if all this economic uncertainty starts to temper, you can start thinking about shifting your focus back to your debt.
Of course, your situation may not be so black and white. You may want to speak with a professional financial advisor to make sure you’re prepared for all possibilities.
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This article provides information only and should not be construed as advice. It is provided without warranty of any kind.
