Paying CRA or paying off CC/LOC

[Hallowed_point]

If you had the option to pay off your credit card/LOC in full OR pay the CRA in full which would you pick and why?

John Doe's CC/LOC is at 13%/9% while the CRA charges 5% for outstanding balances.

Obviously neither option is ideal as it's just moving debt but I'm curious as to whether or not this is something worth considering.

Keeping in mind that John Doe has no previous outstanding balance with the CRA.

[ercchry]

owing the CRA is never good, unless you want them looking reeaaaaallly close at your butthole for now on

and chances are, if you are currently carrying a CC and LOC balance, you are just going to do it again anyway... people are creatures of habit after all

[Hallowed_point]

^In this case definitely not. I've paid off a good chunk of my LOC without touching it for over two years. It's the CC that's hurting me because of a higher balance/interest rate.

[ercchry]

then fill up the LOC and kill the CC

[Hallowed_point]

That's only a 4% decrease in interest compared to 9% on the LOC though (5% CRA) ..didn't really think it was worth it to do that. Plus there isn't enough room on that to cover much. Suppose saving is saving though.

[ercchry]

yeah, fucking around with the CRA is probably not the solution... also think of how that could snowball, since next year you would basically be paying double taxes to get even

[Mitsu3000gt]

Always transfer your debt to the lowest interest creditor, all else being equal.

Not referring to you necessarily, but it blows my mind when I see anyone carry a CC balance when banks hand out ~5% unsecured LOC's like candy for way more than most people's CC limits.

[Hallowed_point]

Yeah that's true..I don't have anyone calling me from my CC or CRA ever not sure I want that stress. But it is tempting to potentially save on interest.

[pheoxs]

I would pay the CRA to prevent them from being douches later in life, transfer as much of the credit card to the LOC as you can, then make minimum payments on the LOC and dump every penny you make into the credit card and pay it off. Once its paid off, don't use it, and take that same payment and roll it into the LOC.

By paying the CRA and making monthly payments to both the CC and LOC everyone stays happy.

[Hallowed_point]

^That sounds like a great suggestion too pheoxs. As little sense as it may make, it feels good to be making progress paying off the LOC without touching it for over 2 years. But ultimately, I'm paying more interest because the rate and balance is higher on the CC.

That was my plan to get more aggressive on paying off the lesser debt once the higher balance/interest rate one was paid off.

[dezmarez]

Has this person filed or have they not filed?

From CRA...

Interest
If you have a balance owing for 2012, we charge compound daily interest starting May 1, 2013, on any unpaid amounts owing for 2012. This includes any balance owing if we reassess your return. In addition, we will charge you interest on the penalties starting the day after your return is due. The rate of interest we charge can change every three months. See Prescribed interest rates.

If you have amounts owing from previous years, we will continue to charge compound daily interest on those amounts. Payments you make are first applied to amounts owing from previous years.

Interest on unpaid taxes may be waived or cancelled under certain circumstances. See Taxpayer relief provisions.

Late-filing penalty
If you owe tax for 2012 and do not file your return for 2012 on time, we will charge you a late-filing penalty. The penalty is 5% of your 2012 balance owing, plus1% of your balance owing for each full month that your return is late, to a maximum of 12 months.

If we charged a late-filing penalty on your return for 2009, 2010, or 2011 your late-filing penalty for 2012 may be 10% of your 2012 balance owing, plus 2% of your 2012 balance owing for each full month that your return is late, to a maximum of 20 months.

Tax Tip
Even if you cannot pay the full amount of your balance owing on or before April 30, 2013, you can avoid the late-filing penalty by filing your return on time.

[Hallowed_point]

This person hasn't filed. Wow...ok so reading that it's 5% for CRA + 1% for each month outstanding. Abort mission lol.

[msommers]

I had a GST adjustment for a measly $78 (which as I expected was an error and later refunded). Regardless, their letter basically said you are required to pay this by any means necessary, even if that results going into debt!

Get the CRA off your back, that's one thing you don't want to deal with later.

[Hallowed_point]

^Recently I made a very simple/stupid mistake resulting in the CRA thinking I owed exactly what I'd already paid for my GST..basically I put the same number in two columns. One would think that something as obvious as this would get flagged and you'd get a courtesy call. Nope, got the bill saying "thank you for your payment of $712.48, your outstanding balance is: $712.48" So I do know that they don't screw around. Had to fax them my corrections and wait for another letter to come in to correct it. Don't want to have them on my back they are way too zealous when it comes to collecting the $$$.

They aren't on my back now, and I don't think I want anymore drama in my life.

[sabad66]

Originally posted by pheoxs
I would pay the CRA to prevent them from being douches later in life, transfer as much of the credit card to the LOC as you can, then make minimum payments on the LOC and dump every penny you make into the credit card and pay it off. Once its paid off, don't use it, and take that same payment and roll it into the LOC.

By paying the CRA and making monthly payments to both the CC and LOC everyone stays happy.

[rage2]

If you don't pay the CRA, they'll make you pay. Garnishing paychecks, seizing assets and auctioning them off lol. I had my paycheck garnished for 2 years before I finally settled my CRA debt many years ago. Not fun.

[Hallowed_point]

^Transferred as much of my CC balance to my lower interest LOC. I'll save a couple hundred on interest at least.

New years resolution is to pay it off my debt much more aggressively.

Plus I don't need them auctioning off my car lol

[Sugarphreak]

...

[Hallowed_point]

^Not really in bad shape..always make more then minimum payments and always on time. But, I've had a hard time getting ahead on the CC and actually paying off the principal. I have 2013's tax money 100% ready to go before the deadline. Paying better attention to these sorts of things for 2014

[busdepot]

Consolidate that debt. Also, CRA is very reasonable when it comes to making a payment plan if you have a large balance owing or even settling for a lower amount if you can pay in full. Talk to an accountant.