Buffett is sitting on US$373 billion in cash — here's what that tells Canadians drowning in 20% credit card debt

That same decision framework can be applied directly to a mistake millions of Canadians are making right now, albeit on a smaller scale.

If you are carrying a credit card balance at 19.99% to 22.99% interest, you're facing the same fundamental question Buffett asks before deploying capital: Where is my money earning the best return, adjusted for risk? For most Canadians right now, the answer isn't the market. It's sitting in their wallet.

Why eliminating 20% debt beats most investment returns — guaranteed

"Invest early and often" is good advice, but only if you're not simultaneously paying 20% interest. That's the part most people skip.

Over the long run, a diversified exchange-traded fund (ETF) tracking the Canadian or global market might return around 7% annually before tax. That is a reasonable assumption, but it's not guaranteed, and it won't show up consistently year after year.

Paying off a credit card with a 19.99% interest rate is different. It delivers a guaranteed, after-tax return of 19.99%, with no volatility or sequence-of-returns risk.

Let's put that into real numbers. Let's say you carry a C$5,000 balance on a standard credit card at 19.99%. Left untouched, that balance generates roughly C$1,000 in interest in the first year alone. That's money you're paying on purchases you've already made, like groceries, utilities, or other everyday expenses. Eliminating that balance is the financial equivalent of earning a 20% return on C$5,000, instantly and without risk.

I've never heard Buffett specifically say "pay off your credit card." But his philosophy is built on one principle: when the return is obvious, and the risk is zero, it's time to act.

What Buffett understands about holding cash vs. taking on high-cost debt

Make no mistake, Buffett's cash never sits idle. It's earning Treasury bill yields, which have been producing solid yields since 2022. But the more important lesson is what he avoids. That is, he does not borrow at high rates to chase unpredictable returns.

That's what you're doing when you're carrying a high-interest credit card balance while investing in the markets. You're borrowing at 20% to fund your current consumption, then betting that the money you invest will beat it in the market. For most Canadians, that's not the case.

The Canadian math: debt vs. RRSP vs. TFSA

This is where the decision becomes practical. Canadians are often told to maximize their contributions to registered accounts, such as their Registered Retirement Savings Plan (RRSP) or Tax-Free Savings Account (TFSA), before paying down "good debt", like a mortgage.

But credit card debt is never good debt, and the math of registered accounts is more nuanced than conventional wisdom suggests. Let's use a simple example.

Two Canadians each have C$300 per month to put to work. One decides to make Registered Retirement Savings Plan (RRSP) or Tax-Free Savings Account (TFSA) contributions with the money and invest in a broad-market ETF. The other applies it to their C$5,000 credit card balance at 19.99%.

The investor earns an expected 7% annually, with withdrawals taxable in the RRSP and tax-free in the TFSA. The credit card payer earns a guaranteed 19.99% equivalent return without worrying about volatility or the timing of their investment.

The TFSA case is the strongest argument for investing alongside debt repayment. Because gains are truly tax-free, a TFSA contribution does not lose its value to future withdrawal tax. But even here, the spread between a guaranteed 20% and an expected 7% is so wide that debt elimination typically wins the math, unless the TFSA contribution comes with an employer match or there is a compelling long-term case for the compounding head start.

The RRSP is a closer call only when the tax refund from the contribution is immediately redirected to the debt. In that case, the net cost of the debt drops, and the comparison becomes more balanced. Without that redirection, investing in an RRSP while carrying 20% debt is almost never the highest-return use of available cash.

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A simple framework for deciding: debt, RRSP, or TFSA

In most cases, the decision comes down to your order of operations, or putting your money where it does the most work first.

Start with high-interest debt. If you're carrying a credit card balance at or near 20%, that's your priority. There's no realistic investment that reliably beats that kind of guaranteed return. If your cash flow is tight, look for a 0% balance transfer credit card offer that can give you breathing room. Just remember that it's a temporary solution, and your goal should still be to eliminate the balance.

The one exception is an employer RRSP match. If you're being offered a 50% or 100% match, take it. It's free money and an immediate return that outweighs even high-interest debt. But beyond capturing the match, additional contributions can wait.

Once you've paid off the debt, the order becomes much clearer. While this won't apply to all Canadians, consider building your TFSA first. You're getting tax-free growth, flexibility, and no penalties for accessing your money. Then, layer in RRSP contributions based on your income and tax situation.

If your only remaining debt has a low interest rate, such as your mortgage or a student loan , the math shifts. At that point, investing alongside repayment is reasonable and often the better long-term play.

Buffett's approach isn't about rigid rules. It's about making sure your capital is always working in the highest-return place available.