$4,680 credit card balance at 20% costs Canadians nearly $1,000 a year — money that could be growing in an RRSP instead

While $980 might not feel catastrophic on its own, the math showing what impact it could have on your future finances is startling. If that money was redirected into a Registered Retirement Savings Plan (RRSP), after 15 years, those earnings could exceed $30,000. (Figures are illustrative; a financial adviser can model your specific situation.)

This is the retirement math that credit card statements don't show.

The balance is growing — and so are the stakes

According to data, credit card balances across Canada have climbed for 31 consecutive months. Total outstanding card debt hit a record $124 billion in Q4 2024, up 9.2% year-over-year (2). Approximately 64% of that sum was revolving — meaning consumers carried it from one month to the next rather than paying it off.

The trend is even more pronounced among younger working Canadians who are now entering their peak earning and RRSP contribution years. Millennials and Gen Z collectively hold $1.1 trillion in consumer credit — a 10% year-over-year increase — and account for approximately 45% of all household debt in Canada. Among insolvent borrowers specifically, credit card debt among millennials surged 35% in 2024, according to research by licensed insolvency trustees Hoyes, Michalos & Associates Inc (3).

"For every person who files insolvency, many more Canadians carry unsustainable credit card balances, struggling silently with minimum payments that barely cover the interest charges," explained Ted Michalos, Licensed Insolvency Trustee at Hoyes Michalos, in a press statement.

That silent struggle carries a compounding cost that most people never see itemized.

Why paying 20% interest is the opposite of investing

Interest on a revolving credit card balance does not behave like a fixed annual fee. It compounds monthly.

On a $4,680 balance at 20.99%, the first month alone costs roughly $80 in interest charges — charges that get added to the principal if only a minimum payment is made.

Over time, that compounding works directly against the compounding that makes RRSP growth possible.

For example, if a borrower makes $100 monthly payments on that average $4,680 credit card balance, it would take more than eight years to pay off the debt. Plus, the borrower would end up spending approximately $5,170 in interest over that period — more than the original debt balance on the card.

But here's where the power of minimizing interest fees really comes into play: By redirecting that $980 per year into an RRSP, at a 6% average annual return, after 15 years, the total investment could exceed $27,000. Reinvest the RRSP tax refund on those yearly contributions (at a 33% marginal rate), for roughly $324 per year and your RRSP contributions would be more than $30,000.

That is the real cost of an average credit card balance held over time — it's not just the interest paid, but the retirement capital never built.

Looking for a new card? Compare hundreds of credit cards to find the option that fits your spending needs.

The balance transfer strategy that frees up RRSP room

For borrowers with good credit, a balance transfer to a promotional low- or zero-interest card can provide a window of 6- to 12-months. This would help accelerate debt repayment — as it eliminates the interest on the debt — and frees up cash to repay debt.

Another option is to take the money you would've spent on interest and pay down debt, while also contributing to an RRSP. Any RRSP tax refund generated by that contribution can then be applied back to the remaining debt repayments.

This strategy works best when the promotional period is long enough to meaningfully reduce the principal and when the borrower has available RRSP contribution room.

Canadians can confirm their available room by checking the most recent Canada Revenue Agency (CRA) Notice of Assessment or by logging into their My Account on the CRA website.

One caution: balance transfer cards typically carry a transfer fee of 1% to 3% of funds moved, and the promotional rate expires. Any balance remaining after the promotional period reverts to the card's standard rate, which may be similar to the rate the borrower started with. So, this strategy only delivers its full benefit if the repayment plan is realistic and disciplined.

When to call a debt counsellor before your retirement window closes

For Canadians carrying more than $10,000 in high-interest debt, the math of do-it-yourself repayment gets harder to manage alongside retirement contributions. In those cases, a non-profit credit counsellor can help identify a realistic repayment path without taking on new (and potentially expensive) borrowing.