He has $100K in credit card debt, $60K in bitcoin. 4 money pros on what to do

“I have $100K in credit card debt, but $60K in bitcoin. Should I use it to repay the debt, or hold onto bitcoin for the long haul?” That’s a question a reader wrote into MarketWatch Picks recently, and as part of our new “Ask the Advisers” column, we asked four financial planners how they’d advise this reader. (You can use this tool to get matched with a financial adviser who may meet your needs.). Here’s what they told us:

Even though it’s possible your bitcoin holdings may make you very rich, pros say you likely should tackle the credit card debt first. Indeed, bitcoin is both highly speculative and poorly regulated, says certified financial planner Lisa Weil. “There is in truth no way of knowing where it will go in the short run or longer term. You might triple your money or you might lose everything,” says Weil. (Note that as of Thursday May 11, Bitcoin was down about 60% from its high of $69,000 in November 2021.)

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Your credit card debt, on the other hand, is a known, certain reality. It won’t go to zero on its own. More importantly, the longer you wait to pay off credit card debt, the more this debt will grow as you accrue interest at potentially punishing rates. “Unless you have other resources to pay off this debt and you can truly afford to speculate and potentially lose whatever you put into bitcoin, I’d recommend first making sure your debts and particularly high interest debts are paid,” says Weil.

Certified financial planner John Piershale recommends liquidating the bitcoin and using it to pay down the debt because credit card debt usually has super high interest. “Be sure to withhold tax on any bitcoin gain or you’ll go from the frying pan into the fire with the IRS. If by some chance you’re in a zero-interest rate period on the credit card, you could wait to cash in the crypto until that 0% period is over if you feel bullish on Bitcoin,” says Piershale. 

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Another way to think about the issue is this: “Would you take on credit card debt to buy bitcoin? Even the most diamond-handed crypto holders would probably say no. Investments including bitcoin have their place. Carrying high interest debt and racking up high interest charges are more like gambling than investing. A lot has to go exactly right for that to end well and extinguish that debt,” says Elliot Dole, certified financial planner at Buckingham Strategic Wealth.

That said, your decision will also come down to how much you want to gamble. Matthew A. Ramos, certified financial planner at MAR Financial Planning, says the key variable to consider here is the interest rate on your credit card debt. “Compare that to what you expect bitcoin will return per year. Paying down the credit card by $60,000 will guarantee you a return equal to the interest rate. If the interest rate on your credit car is 15%, the balance will double in about four and-a-half years,” says Ramos. If you think bitcoin will more than double in five years or earn more than 15% per year, you might want to consider holding onto it.