This Credit Card Tip Could Be The Key To Saving More Money For Retirement

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Ask three Canadians if the country is in the middle of a retirement crisis, and only one will answer “No”. At least that’s what the Healthcare of Ontario Pension Plan (HOOPP) discovered this year.

According to them survey, 67% of Canadians believe we are on the verge of a retirement crisis. As the economy continues to recover from two years of shutdown, Canadians have not been able to save as much as they would have liked. In fact, according to another poll, that of the CIA, almost half of Canadians do not have a financial plan for retirement, and 40% admit that they do not know when they will retire, if at all. .

So it’s clear: when it comes to saving for retirement, Canadians can take advantage of all the help they can get. Besides taking side gigs, not to mention trying out passive income ideas, there is an easy way to generate retirement income, without having to do more than spend money: get a credit card. with cash back.

How can a cash back credit card help?

It sounds absurd – laughable, even. A credit card, you might think. How could that help you save for something as important as retirement?

But here’s what most people forget: With many cash back credit cards, you can deposit your winnings into a brokerage account. Then you can invest your earnings in stocks, ETFs, or mutual funds, which helps you grow your money into a big sum.

You can do this in several ways. On the one hand, you could redeem your cash back for a check. You can deposit this check into your bank account and then transfer the money directly to your brokerage account. With this method, you could even transfer your money to a TFSA, which would provide you with tax benefits, such as no capital gains tax on investment income.

Some credit card issuers will even allow you to deposit your winnings directly into a brokerage account. Alternatively, you can apply your cash back as a statement credit and then deposit money from your own income into a brokerage account. This might work best if you want to deposit money from your paycheck into an RRSP, especially if you get correspondence with the employer.

How can a credit card hurt?

Making money on a credit card is extra money, it’s true. But that comes with a big risk: paying interest on your fees.

Remember, credit cards have high APRs, which get expensive over time. If you have credit card debt – that is, if you don’t pay off your statement balance by the due date – you’ll pay interest. The more interest you incur, the higher your interest costs will be. This is what we call the “credit card trap”.

When credit card interest grows, you could end up paying more on credit card interest than you earned in cash back. For this reason, try not to charge more than you can afford on your credit card. Stick to your budget and don’t overload, no matter how tempting the purchase is.

If you To do you find yourself racking up credit card debt, know that you have options. You can, for example, purchase a balance transfer credit card. These cards often come with a low introductory APR period, which will help slow the rate at which you accumulate credit card debt.

Which cash back card works best for retirement savings?

Easy – the best cash back card is one with a winning rate that closely matches your spending habits.

For example, if you spend more money on groceries than on any other expense (other than housing costs), you will need a cash back card with a higher earning rate for purchases of goods. ‘grocery store. Of course, many credit cards come with more than one bonus rate. If so, look for a card that closely matches your two or three spending categories, such as one that pays more for food, gas, and possibly utilities.

Get a credit card that helps you build wealth

Trust me, while a credit card won’t make you rich overnight, it can help supplement your retirement savings. That, combined with other smart strategies like investing wisely and using tax benefit accounts like a TFSA and RRSP could help you come out of the so-called retirement crisis with a big nest egg.

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