Credit card debt or loan debt: which to pay first?

To face a credit card or loan debt This places Brazilians at a crucial financial crossroads.

In a scenario where millions of families are trying to reorganize their finances, making the wrong decision can be costly.

The choice isn't just about which bill to open first; it's about understanding which financial enemy is faster and more destructive. Both are debts, but their costs and natures are drastically different.

This definitive guide was created to analyze, with complete transparency and current data from 2025, the urgency of each modality.

Let's dissect the interest rates, risks, and practical strategies so you can make the smartest and most responsible decision.

Table of Contents

• Why are credit card interest rates so dangerous?
• What defines a payroll loan?
• Credit card or loan debtMathematical comparison
• What is the impact of the new law on the credit limit for revolving credit cards?
• How do I create a plan to pay off my most expensive debt?
• Is it worth taking out a loan to pay off a credit card?
• Conclusion: The path to reorganization
• Frequently Asked Questions (FAQ)

Why are credit card interest rates so dangerous?

Credit cards are a convenient tool, but their Achilles' heel is revolving credit. It is activated when you pay any amount less than the total of your bill.

This remaining unpaid balance automatically becomes the most expensive type of credit available on the Brazilian market.

The complexity begins here. The interest rates charged are anything but trivial.

According to recent data from the Central Bank of Brazil (BCB), referring to 2025, the average interest rate on revolving credit card debt has reached alarming levels. We are talking about rates that exceed 451% per year.

To illustrate, this rate means that a debt can more than quintuple in just twelve months. It's an exponential growth rate.

No safe investment offers a return close to that cost.

The biggest danger of revolving credit is the false sense of control. Paying the minimum relieves immediate cash flow, but throws the consumer into a spiral of compound interest.

The Total Effective Cost (TEC) of this operation is what truly defines the size of the problem.

Many people don't realize that by paying only the minimum amount, most of that amount only covers the month's interest.

The principal debt (what you bought) is barely reduced. Thus, the cycle of debt perpetuates itself with extreme ease.

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What defines a payroll loan?

A secured loan operates on a completely opposite logic to a credit card. Its main characteristic is the guarantee of payment.

Installments are deducted directly from the borrower's income source. This applies to retirees and pensioners of the INSS (Brazilian National Social Security Institute), public servants, and, in some cases, CLT (Brazilian labor law) workers.

This robust guarantee for the bank drastically reduces the risk of default. Consequently, interest rates are incomparably lower. The lender knows they will receive the payment on time.

We're talking about a much more predictable financial scenario.

In 2025, the National Social Security Council (CNPS) established a ceiling for interest rates on payroll loans for INSS beneficiaries. This limit was adjusted to 1.85% per month.

Converting this monthly rate to an annual basis, we arrive at approximately 24.59% per year (compound interest). Note the colossal difference when compared to the more than 450% of the revolving credit.

Therefore, a secured loan is a structured debt. You know exactly how much you pay, for how long, and what the total cost is. There are no monthly surprises, as long as the payments are kept on schedule.

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Credit card or payroll loan debt: A mathematical comparison

Mathematics is the most honest tool for solving the question of credit card or loan debt.

The numbers don't lie about the urgency. Let's analyze a practical scenario to visualize the real impact of each interest rate.

Imagine an identical initial debt of R$ 3,000 in both modalities.

If this debt of R$ 3,000 is in revolving credit, with an average rate of 451.5% per year (BCB data from 2025), the growth is devastating.

In a few months, it will reach the new legal limit, which restricts the debt to twice the original amount.

On the other hand, the same R$ 3,000 in a secured loan with a ceiling of 1,85% per month would have a much more manageable cost. Growth is slow, controlled, and predictable.

To solidify this difference, observe the table below. It compares the annual Total Effective Cost (TEC) and the fate of a debt of R$ 3,000 in one year, considering the worst-case scenario (non-payment of revolving credit) and the standard scenario for a secured loan.

*The revolving credit debt would reach the R$ 6,000 ceiling (double the principal) in less than 5 months, thanks to the new legislation that limits collection.

The table reveals the truth: a credit card or loan debt It's not a choice, it's a clear priority.

Revolving credit destroys assets in months, while a secured loan is a manageable long-term obligation.

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What is the impact of the new law on the credit limit for revolving credit cards?

An important legislative change, which came into effect in 2024 and is fully active in 2025, was the creation of the revolving credit interest rate cap.

The law stipulates that the total value of the debt (including interest and charges) cannot exceed 100% of the original value.

In practice, if you owe R$ 1,000, your maximum debt will be R$ 2,000.

Many people have misinterpreted this, believing that the interest rate has fallen to 100% per year. This is not true.

The interest rate, as reported by the Central Bank, remains at an exorbitant average of 451.5% per year.

What the law does is apply an "emergency brake" when the debt doubles.

Think of this law as a wall at the end of an abyss. The rate of 451.5% is the speed at which your car (your debt) is racing towards that wall. You're going to crash (hit the ceiling) very quickly.

Although this measure prevents the debt from becoming "unpayable" (such as R$ 1,000 turning into R$ 50,000), it does not make the revolving credit system any less toxic.

Doubling your debt in just a few months is still a terrible idea and a financial emergency.

The payment priority, therefore, remains unchanged.

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How do I create a plan to pay off my most expensive debt?

The answer to “which to pay first” is, unequivocally, the revolving credit card. Once this is clear, the focus should shift from “doubt” to “action.” A repayment plan is essential.

The first step is to stop the bleeding. This means stopping the use of the credit card immediately.

Keep it in a hard-to-reach place. The goal is to freeze the outstanding balance for as long as possible.

Next, contact your card issuer. Don't agree to pay the minimum amount. Request to "installment your bill."

Although installment interest rates are still high (around 180% aa in 2025), they are drastically lower than the 451.5% of revolving credit.

This transforms the "snowballing" debt into a debt with fixed installments, similar to a secured loan. You gain predictability.

At the same time, it's vital to conduct an honest financial assessment. Use spreadsheets or apps to track every penny that comes in and goes out. Understand where your money is going.

Only with this financial map will you be able to cut unnecessary expenses. Every real saved should be directed towards paying down credit card debt (whether it's revolving or already being paid in installments).

Renegotiation is essential. If the installments offered by the bank are still too high, don't give up. Look for debt renegotiation platforms that mediate contact and seek discounts.

For a complete overview of your finances and organizational tips, the portal My Financial Life, from the Central Bank of Brazil, offers free and reliable guides on budget management.

Is it worth taking out a loan to pay off a credit card?

This is one of the smartest liability management strategies. It's known in the market as "smart debt swapping." The short answer is: almost always, yes.

The logic is simple. You are replacing a debt that grows at 451.5% per year with one that grows at 24.59% per year (using the ceilings as a reference). It's a purely mathematical decision.

By doing this, you save hundreds or even thousands of reais in interest.

However, this operation requires caution. The first step is to check your "deductible margin." The law limits how much of your salary or benefit can be committed to loan installments.

If you have available credit, you can apply for a new secured loan. The full amount must be used to pay off 100% of your credit card debt. Do not use this money for any other purpose.

After paying off the credit card, cancel it or drastically reduce the limit. The goal is to eliminate the tool that caused the original problem, while you pay off the debt in a cheaper and more structured way.

This switch provides immediate relief to your cash flow and, most importantly, peace of mind. You go from an uncontrolled emergency to a planned debt with a set end date.

Conclusion: The path to reorganization

When faced with the choice between credit card or loan debtThe technical and responsible answer is always the same: prioritize paying off your revolving credit card balance in full. The difference in interest rates isn't small; it's enormous.

While payroll-deducted loans require discipline, they are dozens of times cheaper and offer predictability.

Revolving credit card debt is a financial trap designed to grow out of control, even with the new legal cap in 2025.

Paying off the most expensive debt first isn't just a tip; it's the only viable strategy to prevent a small financial problem from turning into an avalanche.

Take control, swap expensive debt for cheaper debt if possible, and reorganize your budget.

Dealing with debt is a mathematical challenge, not a moral failing. Use the information to your advantage and start your journey back to financial health today.

To be sure you are fulfilling all your financial obligations, consult the Registrato, from the Central Bank, a system that lists all your loans and bank accounts.

Frequently Asked Questions (FAQ)

What happens if I only pay the minimum amount on my credit card?

By paying only the minimum amount, the remaining balance goes into revolving credit. The highest market interest rates will be applied to this balance (an average of 451.5% per annum in 2025). Your debt will grow exponentially until it reaches the legal limit of 100% of the original amount.

Has the new 100% ceiling law made the rotary loan safer?

No. The law only limits the maximum amount of debt (the debt cannot exceed twice the principal).

She did not reduce the interest rate. Her debt will still grow at a rate of 451.5% per year, reaching that maximum limit in a few months.

I have a debt on my credit card or a loan, but I can't pay either of them. What should I do?

In this case of total default, the priority is still to resolve the card issue. Contact the issuer and try to arrange an "installment payment plan" with lower interest rates.

If even that is not possible, look for the Desenrola program (if active) or debt renegotiation fairs.

Is the interest rate for installment payments on a bill the same as the revolving credit interest rate?

No. The interest rate for installment payments on your bill (when you negotiate with the bank to pay the balance in fixed installments) is significantly lower than the interest rate for revolving credit.

In 2025, installment payments will be around 180% per annum, while revolving credit will exceed 450% per annum.