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[OP]
Deal Addict
Jan 31, 2007
4108 posts
1182 upvotes

Rsp question

I am due for renewal and in order to get approved they want me to pay off my credit card. Is it good idea to take out rsp to do this? I was told there's 30% tax charge.
5 replies
Deal Expert
User avatar
Jan 27, 2004
49431 posts
12993 upvotes
T.O. Lotto Captain
EEE2 wrote: I am due for renewal and in order to get approved they want me to pay off my credit card. Is it good idea to take out rsp to do this? I was told there's 30% tax charge.
That would be quite disadvantageous to you.
Because you’re taking it out while @ a high tax bracket.
Is there a way they can refinance the credit card debt into your mortgage? They might be willing to do it if you close that credit card.
Deal Addict
User avatar
Jan 2, 2012
4347 posts
2450 upvotes
Toronto
EEE2 wrote: I am due for renewal and in order to get approved they want me to pay off my credit card. Is it good idea to take out rsp to do this? I was told there's 30% tax charge.
What's the mortgage amount and what's the credit card debt to pay off?
You have no other savings, TFSA, etc funds to draw from?
UrbanPoet wrote: That would be quite disadvantageous to you.
Because you’re taking it out while @ a high tax bracket.
Is there a way they can refinance the credit card debt into your mortgage? They might be willing to do it if you close that credit card.
Rolling the credit card debt into the mortgage will probably turn the situation into a refinance vs a typical renewal. With a refinance to increase the mortgage amount, there will be more fees, appraisal, re-qualification, etc involved. Though all this is probably still better than withdrawing RRSPs to pay the CC debt.
Deal Addict
Jun 7, 2017
1043 posts
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BC
Wait, you have credit card debt and are a homeowner? Do you even finance, bro? Who the eff has CC debt?
Deal Addict
May 13, 2015
1285 posts
1721 upvotes
Dartmouth, NS
If you take money out of your RRSP, that money is added to your taxable income. So if you earned $100,000 in taxable income, and you took out $20,000 from your RRSP, you would pay tax as if you earned $120,000 that year.

I couldn't really give you proper advice without knowing more about your situation.

For some people, they might normally make a pretty high income, but due to COVID-19, their income could be very low this year... in which case, taking money out of your RRSP this year when your income is very low might be a good idea.

The reason they charge the "withholding tax" is because they don't want people taking money out of their RRSP and then not saving enough to pay their higher tax bill. They only hold back 30% if it's over $15,000... otherwise it's 20% or 10%.

In general, you probably don't want to use your RRSP money because you'll have to pay more in tax to the government. If you have money in a bank account or TFSA, I would probably use that instead.

The real question is why do you have credit card debt when you own a house? Are you paying a really low rate due to balance transfer promotions? What is the interest rate? Couldn't you get a home equity line of credit that would be cheaper? Don't know anything about your situation but if you're having trouble refinancing your house because of $15,000+ in credit card debt... selling the house and getting something cheaper or renting could be the best option.
[OP]
Deal Addict
Jan 31, 2007
4108 posts
1182 upvotes
Broker made a mistake and now got approved.

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