Warren Buffett isn't against all types of borrowing, but only loans that put essentials at risk for non-essentials. Buffett had said in 2001 that repaying high-interest debt like a credit card is above any investment idea he could offer.
'The idea of trying to borrow money at 18% [or more] and thinking you're going to get ahead in life—it isn't going to work,' he had stated when asked about high-interest debt decades ago.
The average US credit card interest hovered around 21%, which is a 45% surge compared with 2020. According to the Federal Reserve Bank of New York, US credit card balances surged by $44 billion sequentially in Q4 2025 to $1.28 trillion, boosting the average total household debt to $18.8 trillion during the quarter. Another recent report showed that transitions into severe delinquency also increased during the quarter for credit card balances, mortgages, and student loans.
This economic landscape is likely driven by an uptick in unemployment, rising living costs due to inflation, and volatile geopolitical dynamics.
Buffett believes that it is 'insane' to risk what you have for something you don't need, regardless of how the odds look. In short, if a financial move to upgrade your lifestyle or secure marginally better returns affects your security, it is best that you avoid it.
This philosophy is the reason Buffett urges people to clear any credit card debt as fast as possible, given that he believes a $10,000 debt at an 18% rate could put you 'in trouble probably for the rest of your life.'
Multiple Ways to Repay High-Interest Debt
In order to repay debt faster, it is vital to list each one with the current outstandings, interest rates, and monthly minimum payments before ranking them by rates and targeting the debt with the highest one.
The goal is to leverage the Avalanche debt repayment strategy by prioritizing the highest interest rate debt and then using any additional cash to pay monthly minimums for any other debts. This strategy does not focus on lowering your total outstanding debt faster, like the debt snowball strategy of targeting the biggest loan but helps close high-interest rates one by one. It helps free up money on interest that could be used for other debt or purposes.
As you focus on lowering your debt, try not to apply for new car loans or take out personal loans for vacations or gadgets by asking yourself if you really need them and how new debt could impact your current financial life.
At the same time, attempt to create an emergency fund to ensure that surprise expenses don't force you into taking out loans. When you have repaid high-interest debt, you could consider taking out loans to create long-term value, especially if you have a business.
In all, Buffett's philosophy is to avoid bets that could cost you what you cannot afford to lose. Use Buffett's debt-avoidance strategy to avoid lifestyle debt that compounds while having a cash buffer for unforeseen life events.
Disclaimer: Our digital media content is for informational purposes only and does not constitute investment advice. Please conduct your own analysis or seek professional guidance before investing. Remember, investments are subject to market risks, and past performance does not guarantee future results.
