Paying down high interest rate credit card debt is considered what type of investment?

Paying down high-interest rate credit card debt is rightly classified as a high after-tax return, risk-free investment due to several key reasons.

When you pay off debt, especially high-interest credit card debt, you are effectively earning a return on your money that equals the interest rate of the debt you're paying off. For example, if you pay off credit card debt with an annual interest rate of 20%, you are avoiding that rate of interest from accruing. In this sense, eliminating the debt yields a return of 20% on your investment — a substantial and guaranteed return compared to many traditional investments which involve market risks and volatility.

Additionally, this type of investment is risk-free in the sense that you are not subjecting your principal to market fluctuations; rather, you are ensuring that your financial situation improves immediately by reducing the liabilities you carry. The after-tax aspect comes into play as well; because the interest you save by paying down the debt is not taxable, the effective return may be even higher than the stated interest rate of the credit card, making the net benefit clear.

In summary, paying down high-interest credit card debt is akin to a risk-free investment with a significant after-tax return, as you are securing savings that directly impact your