Use Your Credit Card Rewards Points to Save in Your RRSP or TFSA

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by Ratehub.ca November 20, 2015 / No Comments

This post was sponsored by Vancity.

Retirement brings to mind casual strolls along the beach, rounds of golf and leaving behind the hustle and bustle of a full-time job. Unfortunately, these dreams may seem out of reach for some Canadians.

Even though we as Canadians have access to RRSPs and TFSAs, most Canadians don’t take full advantage of them, and this could leave us vulnerable in the future.

In 2013, just 23% of tax filers contributed to an RRSP and only 7% of eligible Canadians maxed out their TFSA contribution room.

So how can you boost your retirement contributions without compromising your budget? By using your credit card rewards points.

Let’s look at how much you could contribute to your Vancity RRSP or TFSA when you spend on two of Vancity’s credit cards: the enviro Classic* Visa* and the enviro Gold Visa with accelerator option.

enviro Classic Visa

The enviro Classic Visa credit card lets you earn rewards on your spending without paying an annual fee. Plus it offers purchase security insurance, travel accident insurance, and extended warranty¹. The interest rate is 19.5%, and you’ll earn 0.5 points for every dollar you spend1.

If you spend $2,500 a month or $30,000 annually, you’ll earn 1,250 points every month or 15,000 a year. You’ll also earn 2,000 bonus points when you enroll at myvisarewardsplus.com. You’ll be able to redeem 17,000 points and deposit $170 into a Vancity RRSP or TFSA Jumpstart® high-interest savings account and $150 annually after that. The minimum redemption for both accounts is 5,000 points. Contributing to either account will allow your money to grow tax-free (inside the account) while an RRSP contribution will give you a tax deduction.

If you use these rewards to boost your annual contribution to your RRSP or TFSA, you’ll be able to save more for the future. If you contribute $170 in the first year and $150 for the next four years, you’ll end up with approximately $781 in savings (if interest rates stay the same).

Number of years 5
Interest rate2 0.70%
Total contributed $770.00
Interest earned $11
Total balance (contributions + interest) $781

enviro Gold Visa with accelerator option

The enviro Gold Visa with accelerator option also lets you earn points on your daily spending, but with a few key differences. First, there’s an annual fee of $147. Second, this card gives you access to more insurance options including extended warranty¹, travel accident insurance, delayed and lost baggage insurance, auto rental collision loss/damage waiver, purchase security and price protection.

The interest rate is still 19.50%, but you’ll earn more rewards points, faster. With this credit card, you’ll earn 1.5 points for every dollar you spend.

If you spend $2,500 a month or $30,000 a year, you’ll earn 3,750 points each month or 45,000 points annually. You’ll also earn 2,500 points when you make your first purchase and 2,000 points when you enroll at myvisarewardsplus.com. Plus upon each card anniversary, you’ll earn 3,500 points.

After your first year, you’ll be able to redeem 49,500 points and deposit $495 into an RRSP or TFSA Jumpstart high-interest savings account and $485 annually after that. If you contribute $495 in the first year and $485 for the next four years, after you’ve deducted the $147 annual fee you’ll end up with approximately $1,734 in savings (if interest rates remain unchanged).

Number of years 5
Interest rate2 0.70%
Total contributed $2,435.00
Interest earned $34
Subtotal balance (contributions + interest) $2,469
Annual fee payments $735
Total balance (contributions + interest-annual fee) $1,734

You can also wait until you have 50,000 points or more to redeem and put the money in an RRSP or TFSA term deposit, which has the potential to earn a higher interest rate and save even more for the future.

1Conditions apply. For complete terms and conditions visit vancity.com/visaterms. For rewards program terms and conditions visit myvisarewardsplus.com/termsandconditions.
2TFSA Jumpstart® High Interest Savings Account rate effective August 3, 2015.
™ enviro and Vancity are trademarks of Vancouver City Savings Credit Union.
*Trademark of Visa Int., used under license.
Jumpstart® High Interest Savings Account is a registered trademark of Vancouver City Savings Credit Union.

Vancity does not make any express or implied warranties or representations with respect to any information or results in connection with these calculations. Vancity will not be liable for any losses or damages arising from any errors or omissions in any information or results, or any action or decision made by you in reliance on any information or results.

These calculations are made available to you as a tool for independent use and is not intended to provide investment advice. Actual results may vary, possibly substantially. We cannot and do not guarantee its applicability or accuracy. All examples are hypothetical and are for illustrative purposes only.

Flickr: KMR Photography