📅 Last updated: 8 May 2026
· 🏷 Topic: Debt, financial priorities
· 🇧🇪 For: Belgian retail investors
Before you start investing, one rule trumps all others: pay off expensive debt first. A credit-card debt at 12-15% interest is — both fiscally and mathematically — a far greater “gain” than any investment can risk-free deliver.
The maths
Suppose: you have €3,000 of credit-card debt at 14% interest + €3,000 of cash available.
Option A — invest, leave the debt outstanding:
– Invests €3,000 at an expected 7% return.
– Pays €3,000 debt × 14% = €420/year in interest.
– Net: 7% earned − 14% paid = −7% net loss/year.
Option B — pay off the debt first:
– Debt gone.
– No more interest cost.
– Then €3,000 free to invest.
– Net: 7% earned, with no debt cost.
Option B wins structurally 14% per year versus Option A. No investment offers anything like that risk-free.
Which debts should you pay off first?
| Debt type | Typical interest | Priority |
|---|---|---|
| Credit-card balance | 12-18% | Immediate |
| Personal loan | 6-12% | High |
| Car loan | 4-8% | Medium |
| Mortgage (pre-2022) | 1.5-2.5% | Low (see below) |
| Mortgage (recent) | 3-4% | Medium — trade-off |
| 0%-interest debts (e.g. promotional) | 0% | No priority |
Credit-card balances are always top priority. No discussion. Belgian credit cards with a “payment in instalments” option carry interest of 12-18% — that’s a guaranteed 12-18% “return” by paying them off.
How to pay down credit-card debt optimally?
1. Stop buying on interest. If you can’t avoid a credit card, make sure you pay the full balance every month. No interest = no problem.
2. Avalanche method (mathematically optimal): pay off the debt with the highest interest first, then the next.
3. Snowball method (psychologically motivating): pay off the smallest debt first for the sense of accomplishment, then the next.
Both work — pick what suits you.
What NOT to do
❌ Invest in equities to “beat” 14% interest. Expected equity returns are 6-8% — less than credit-card interest. And it’s risky on top of that.
❌ Take out a loan to invest (margin trading, leverage). For retail investors far too risky — leverage amplifies both gains and losses.
❌ Make the credit-card minimum payment and invest the rest. That is the most expensive option mathematically.
Belgian context
In Belgium credit-card debt is less of a problem than in the US — most Belgian credit cards are settled in full each month. Even so:
- “Revolving credit” cards from some banks (and credit providers) do charge monthly interest.
- “Personal loan” products are more common in Belgium than credit-card balances — just as urgent to pay off if the rate is >5%.
Order of financial priorities (summary)
- Debts >5% interest paid off.
- Emergency fund built — 3-6 months of fixed expenses on a savings account.
- Employer match in EIP/group insurance fully used.
- Pension savings — €1,050 or €1,350 contributed for the tax reduction.
- Invest in a diversified portfolio (equity ETF + bonds).
- Buy your own home (if desired).
- Speculative investments (crypto, individual stocks) — small percentages, only what you can afford to lose.
💡 The order is mathematically optimal. Anyone who personally struggles with motivation can do steps 4 and 5 in parallel for the psychological benefit — seeing money grow while debts also shrink. Not mathematically optimal, but emotionally sustainable.
🔗 For the broader strategy: see Beleggingsfundamenten(NL) and Hypotheek vs beleggen(NL).
The comparison gets stronger after tax
The conclusion “clear the debt first” is right, and it becomes clearer once both sides are stated after tax. Credit-card debt in Belgium typically carries a double-digit annual rate. Repaying it earns you that rate — guaranteed and entirely untaxed.
An investment has to match that after three levies:
- Stock-exchange tax on purchase: 0.12% to 1.32% depending on the fund.
- 10% capital-gains tax on realised gains above the annual €10,000 exemption.
- 30% withholding tax on distributions, for a distributing fund.
To beat a 12% card rate, an investment must therefore return meaningfully more than 12% gross — every year, with certainty. That does not exist. Repaying here is not the conservative choice; it is the highest risk-free return available to you at that moment.
The order this implies
- A small emergency buffer first — a few hundred euros up to roughly one month of expenses. Without it, the next unexpected cost lands back on the card and the cycle restarts.
- Then clear the most expensive debt entirely, highest rate to lowest.
- Then build the emergency fund out to three to six months.
- Then invest, with money you will not need for years.
One exception worth weighing: an employer contribution to a group insurance or pension-savings scheme that you forfeit by not participating. That is an immediate return which can exceed even expensive card debt.
Sources
- Wikifin — Paying off debts
- FSMA — Consumer credit
- Test-Aankoop — Credit-card comparison
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