Should you use inheritance to pay off credit card debt?

CBS News

08-05-2025

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It could make sense to use an inheritance to wipe out debt, experts say, but it's not always the best option.
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Elevated interest rates and record-high consumer debt continue to impact the economy and strain borrowers. Despite cooling inflation, prices aren't coming down fast enough to provide meaningful relief to many Americans desperately seeking it. Amid the current economic uncertainties, the Federal Reserve extended its pause on benchmark interest rates in the range of 4.25% to 4.50% during its May meeting.
Meanwhile, credit card debt has surged, with the national average balance among cardholders reaching nearly $8,000. In this climate, it's no surprise that many people are looking for ways to pay down their credit card debt. And if you've recently received or expect to receive an inheritance, you might be wondering whether to apply it to your debt or if the money would be better spent elsewhere. Here's what to know.
Find out how to start tackling your expensive debt today.
Should you use inheritance to pay off credit card debt?
The answer to whether it makes sense to use your inheritance to pay off credit card debt likely depends on your financial situation, goals and other considerations. Here's when it may and may not make sense.
When using an inheritance to pay off credit card debt makes sense
From a numbers standpoint, using your inheritance to wipe out your credit card debt is usually a wise move, notes Matthew Ferrell, a certified financial planner and owner of MADE Financial Design.
"With many credit cards charging over 20% interest, and long-term market returns averaging 8% to 10%, paying off the debt offers an immediate and higher return. It also lowers monthly obligations and reduces stress," says Ferrell.
Still, the decision doesn't have to be all or nothing. In some cases, a more balanced approach can make sense, especially if the debt isn't overwhelming.
"If the debt is large and weighing you down, using the inheritance to pay it off can lift a huge burden," says Sarah Maitre, a certified financial planner and founder and financial planner at Camriel Advisors. "If your balances are smaller and manageable, it might make sense to split it. You could pay off the debt and use some of the money to invest, save or do something meaningful."
Learn what debt relief strategies you can use to get rid of your debt now.
When using an inheritance to pay off credit card debt might not be the best move
While an inheritance can give you the funds to get the debt under control, it may not make sense in some situations. Depending on your financial situation, there may be better uses for the money, or reasons to hold off altogether.
"If there is something urgent or claims against the estate, I would hold off on spending any of the money yet," says Kyle Harper, CFP and financial advisor at Harper Financial Planning. "The goal with inheritance money would be to put it where it is going to work hardest for you."
That could mean paying off high-interest debt, he notes, but it could also mean investing in yourself, such as enrolling in school to boost your future earning potential.
"Too often inheritance is spent on depreciating assets or consumables like cars or trips, and the beneficiary soon finds themselves in the same position they were before the inheritance," Harper says.
Ferrell explains it also may not be the best move if your balances are low, on a 0% promotional rate or being managed effectively.
"In those cases, the money might be better used to build savings, invest or tackle other financial priorities," Ferrell says.
Sometimes, inheritances come with strings attached.
"When my wife received an inheritance, we didn't have credit card debt, but the trust required us to use the money a certain way. We used it to pay off a low-interest mortgage. In hindsight, we might have earned more by investing, but the trust didn't allow that," Ferrell says.
In other words, the right decision might depend not only on your debt and financial goals but also on any legal or emotional considerations tied to the inheritance.
Debt relief alternatives for high credit card debt
If you don't have an inheritance to help tackle high credit card balances, there are several debt relief strategies you might explore. If you've exhausted other debt reduction options and want to avoid bankruptcy, these alternatives may help to reduce what you owe and get back on track.
You might consider enrolling in a debt management program through a nonprofit credit counselor. This type of program may help you secure lower interest rates, erase or lower fees and combine your payments into a single monthly payment.
Debt consolidation programs offered through debt relief companies are another option. These programs are similar to debt consolidation loans, meaning that they roll multiple debts into one lower-cost loan, but as with any financial program or strategy, be sure to consider the pros and cons before proceeding.
The bottom line
Using an inheritance to wipe the slate clean can be a smart move, but only if you take steps to keep from ending up in the same situation again. And, as you work to zero out your credit card balances, consider what led to the debt and how you can avoid debt problems in the future.
"It generally is a good idea to use inheritance to pay off high interest rate debt," says Harper. "Before you do so, though, the root issue needs to be addressed. If it was a spending problem or a bad habit that led to the debt in the first place, it needs to be identified and corrected. If the behavior is not addressed, the same habits will lead to the same results and that beneficiary will soon have a balance back on the credit cards."
By being proactive and intentional about implementing sound financial habits, you can turn your windfall into long-term financial strength.