As part of the $900 billion coronavirus relief bill, eligible Americans will soon receive a long-awaited second stimulus check — individuals who earned less than $75,000 in 2019 will receive $600 and couples who earned less than $150,000 will receive $1,200.
When considering how to spend the money, Kevin O’Leary, “Shark Tank” star and chairman of O’Shares ETFs, recommends “paying down credit card debt with all of it,” if you’re in a position to do so, he tells CNBC Make It.
Credit card debt can be hard to pay off due to high interest rates and compound interest, O’Leary says. Indeed, the average, APR, or annual percentage rate, for all credit card accounts is 14.87%, according to data from the Federal Reserve, and can rise to nearly 30% depending on credit score.
Ellevest CEO Sallie Krawcheck has given similar advice: “If you have debt with interest rates of 10% or more, we recommend not saving [the stimulus check]. Instead, use it to pay off that debt,” she recently told CNBC Select.
However, other financial experts advise first considering whether the extra cash is needed for emergency savings, which should cover three to six months of expenses, or to pay high-priority bills, including food and rent, before using it to pay off debt.
“The first priority is save, save, save,” Suze Orman recently told Grow when asked about how Americans should spend their stimulus check. “Would I be spending that money to pay down credit card debt? No way.”
Instead, “I would be paying the minimum payment due on all credit cards. And I don’t care what the interest rate is,” Orman said.
But according to O’Leary, paying off credit card debt is “the best investment [Americans] can make.”
Disclosure: CNBC owns the exclusive off-network cable rights to “Shark Tank.”