It looks like a close call. It usually is not.
The two returns, compared properly
Clearing a 20.99% card balance is a guaranteed, tax-free 20.99% return. An RRSP contribution at a 31% marginal rate returns 31% once, as a refund, and then the money is exposed to market risk and taxed on withdrawal.
| Option | Immediate value | Certainty |
|---|---|---|
| Clear the card at 20.99% | $2,099 a year, forever | Guaranteed |
| RRSP at a 31% rate | $3,115 refund, once | Guaranteed refund, market risk after |
| RRSP, then use the refund on the card | $3,115 + $654 a year | Both |
That third row is the answer for most people with room in both directions: contribute, then direct the entire refund at the balance. You capture the deduction and still cut the interest.
The exception that beats both
An employer RRSP match outranks everything. A 50% match on a $5,000 contribution is $2,500 of free money — more than twice what clearing the same balance saves in a year. Take the match first, always.
Run it on your own numbersAccount optimizerWhere your next dollar belongs: FHSA, RRSP, RESP, TFSA or the debt.Why the minimum payment is the real problem
A minimum payment of roughly 2% of the balance on $10,000 at 20.99% takes about 27 years to clear and costs more in interest than the original purchase. Any fixed payment collapses that: $400 a month clears the same balance in about 31 months.
Run it on your own numbersBalance transferA 0% promotion with a 3% fee usually beats both options above.A usable order of operations
- Capture the full employer match.
- Clear anything above roughly 12%: cards, payday credit, store financing.
- Fill FHSA room if a first home is the plan.
- Then choose between RRSP and TFSA on the marginal-rate test.
Figures are the published 2026 federal and provincial amounts at the time of writing. General information only, not financial, tax, or legal advice — see the methodology and disclaimer.