Tag Archives: American Express

Once You’re Debt Free…

I was super excited for a couple that someone met and asked to contact me. He told them to get in touch with me for some feedback on whether to use investment money to pay off their mortgage, or keep investing. That wasn’t the exciting part, though. Debt free, except the home, is something most people haven’t ever experienced in their life. If your home is also paid off, you’ve reached the pinnacle of financial success. But the critical hurdle is to have all the consumer debt cleared first.

This couple, at $780,000 actually is now around part of the richest one percent in the world. That includes your toys, cars, and equity of your home. Net worth is the total of what you OWN less the total of what you OWE. If you’re someone in that position, there are a few general things you should consider:

Close any line of credit you have. That’s especially true if it’s secured against your home. Once you have some net worth – stop borrowing forever. Don’t be tempted to just keep that line of credit in case…close it today.

Have one normal second credit card, but get an American Express card right from them with no monthly payments. A real charge card forces you to pay the balance in full every month. Close every other card but these two.

What’s you big reward for having won with money now? Maybe it’s a new vehicle every five years, perhaps it’s travelling, or now doing a ton of charitable giving. Set up a separate savings account and have money transferred into it automatically every month. $500, $800, or whatever accumulates automatically and pretty quickly to fund your well-earned big rewards.

Make sure your investments are conservative if you’re into your 50s or older. But do make sure they grow, and aren’t parked at a bank with really bad returns. Whether it’s $200,000 or $2 million – conservative investments should still yield around five percent a year before taxes! That will double what you have in the coming eight to 10 years!

If your investments do, or will, include rental property, make sure it’s with 50% down. Pay it down if you have one or have the 50% down if you buy one. Do not make a rental property the reason your finances crash. The risk isn’t worth the income. 50% down lets you sell it in a week no matter what the economy does.

Set up a full emergency account. Most people struggle with the first step of one week’s pay to get started. If you’re financially successful, set up a savings account with three to six months of all your expenses. That way you’re not breaking investments, cashing RRSPs, or using a line of credit in an emergency. If you need big car repairs or a new roof, it’s no longer an emergency, but only an inconvenience.

If you still have a mortgage, it’s time to get serious about paying it down or paying it off. You may just want to write a cheque for the balance and then re-direct what you were paying a month back into your investments. Plan B would be to pay 10% extra each year, cut the leftover term down, and change to weekly payments to cut another four to five years off the time left. You have the money – now just increase what goes on the mortgage.

Lastly, pay it forward. Make sure the kids of friends, your nieces, nephews, grandkids, or families in your church or elsewhere get to learn the lessons you know AND that you live: Put some money into savings each month, live on less than you earn, and learn the difference between needs and wants. Oh and if you care enough to share: Got to Mosaic and get someone a copy of the Money Tools book. They may not listen to you but maybe they’ll read a chapter or two…

Keeping You Updated

Things change pretty quickly in the world of finance, credit, money and investing. Here are some updates to things we talked about in the last few  months. You can always find the stories at yourmoneybook.com and click on the radio stories button:

A few months ago we talked about the changes for airlines and your frequent flyer miles. Well, Air Canada just did another round of cutbacks to what you’ll earn and an increase to what you’ll need to redeem. Remember to think of your reward miles like bananas. Use them up as they don’t increase in value over time! Oh, and Westjet and Air Canada now charge baggage fees – surprise! Did you think they’d just ignore the $30 to $50 million in profits that you’re now going to hand over forever?

If it makes you feel any better, the deep discount carriers in Europe and the US now charge for carryon luggage. With Spirit Air, you can pre-buy it online at $35 for a carryon. If you want until you get to the airport, it goes up to $50 and if you do it at the gate, it’s $100 for a carryon!  Oh, and you’re paying $10 to print your boarding pass.

Yikes, it’s offical: Costco is dumping American Express in Canada. You’re Amex card is no longer welcome starting January 1st. They’re now partnering with Capital One. What’s in my wallet? Not Capital One! But, it’s a good guess that they changed over for a whole lot more money from Capital One…But why go from Amex whose clients spend four times more than Visa clients to a card that targets credit challenged people? Makes no sense, even if their kick-back is way higher.

I just read two reports that show independent book stores are growing in numbers and volume of sales. Great news as I love independents. I don’t deal with Chapters – you won’t find my books with them. I’m the author of 17 books. 14 are only on my web site and three are ONLY available at a few independents, including Mosaic on Bernard. When I talk about shopping local, I actually give up a ton of sales to do so. Actions speak louder than words.

For the last month, the stock markets have gone a little nuts. Down 300 points in a day, up 200 the next. We keep talking about the dangers of buying one or two stocks. If you’ve done that, if you gambled like that, you’re probably down a ton of money. If you’ve invested in good growth mutual funds, you’re already up again. I manage a seven figure account for a relative and all the bad news last month still had a 2% return for the month with Dundee Wealth.

And if you’re a gambler, gold and silver are below 2010 prices. Bitcoin, which is an online currency is down 75% for the year. If you bet only on energy stocks, you probably lost over 40% of your money. Those one-off buys are not investing. They’re gambling – and on these and many others, it’s a big loss right now. Investing is a five year or longer time period with a mix of good growth mutual funds with a long track record. Investing is also buying a fixed amount each month. Set it and forget it.

Advertisements: What You Hear & What You Need to Know

I actually enjoy good ads. Not only do they keep all media outlets in business, they support a ton of local businesses, and can also inform, and be memorable. Who doesn’t enjoy the U.S. Superbowl ads? Even the Canadian ones are well done.

But not all ads are created equal and some of them really need you to think and ask questions before buying. Do you only see the large print and never the ‘up to’? Up to triple the reward points…1% introductory rate? No payment for six months?

The largest credit card marketing is for reward cards because they have an annual fee. When you see any ad with triple reward points, that’s not the time to apply, but to get a magnifying glass and check the fine print first. Your triple rewards will be on one or two categories such as restaurants or drug stores. It’ll likely be for places with the biggest markups where they have the “room” to give you the triple points, or restaurants where you’ll earn maybe an extra 5 or 10 points, because you’re probably going out to dinner two or three times a month, tops. On the rest of your charges, the 90% or more, the points aren’t tripled. Hear me really clearly: Nobody ever became financially successful because of their reward points. People become financially successful paying cash or debit!

One of my favourite shows is the Amazing Race. This year, Scotiabank is the main sponsor with their American Express card and they have two very cute ads in the show. This is not a real charge card that you ought to have (and the only one I use) where you have to pay the balance in full. It’s a regular Amex card that allows you to make minimum payments versus having to pay it off each month.

Scotiabank’s main slogan is that you’re richer than you think. In fact, it’s the opposite: You’re poorer than you think. 50% of us can’t live without one paycheque, 70% can’t write a cheque for a $3,000 emergency, the percentage of seniors taking debt into retirement is exploding, and a CBC report last night showed 48% of us will rely on CPP for our entire retirement income. But remember that the main business of banks is to lend money. That’s how they make a profit. If the slogan were that you’re poorer than you think, you may borrow and spend less and save more. That’s how banks would lose money. However, if you have a ton of borrowed money, you’re richer than you think…for a while…until you have to pay it back from the same income you had BEFORE the line of credit, car loan, or new credit card.

It’s the old saying of buyer beware. Enjoy the ads, get the information, and then start asking yourself the right questions before signing. It’s a jungle out there – be careful.

The World of Reward Points Is Changing

The average Canadian has five reward programs of one kind or another. It might be a 10th free haircut, frequent flyer miles, 10% off if you spend over a certain amount, or rewards on your credit card.

Whatever you’ve figured out about them will be all different in the next few years. In short, the programs will be converting from volume to profitability and the opposite for credit card rewards. Right now, you’re getting rewards on your visits or spending totals. Down the road it’ll be whether you buy something profitable. No more points (or very few) to buy something at a discount, but now big rewards when you buy something way overpriced or at full retail price.

In the airline business, Air Canada has done three quiet changes to their reward programs already. Cheap seat-sale tickets now get you 25% of the miles versus full price so-called Flex tickets. Delta Airlines is already the process of fully converting their frequent flyer program. If you collect miles you need to know this. It will become the norm with every other airline. You’ll no longer earn miles based on distance flown, but on the amount you spent. It’s turning frequent flyer programs upside down. So, a last minute ticket to Vancouver at a big price will get you more miles than a discount flight to Europe.

The programs will be based on your profitability with the airline. If you make them a ton of profit – you’ll get a ton of miles. The biggest losers will be those of us who are price sensitive and bargain shop for flights. In the next few months I’m cashing out all my miles for gift cards or cash – better safe than sorry. When this comes to other airlines, you’ll be way better off getting a points reward card that lets you accumulate points for gas and other purchases – you’ll end up getting a lot more rewards than from an airline!

In the credit card world, the change will be to quantity of transactions. American Express has now introduced a new credit card that will increase your reward points by 20% once you reach 20 transactions in a month. For Amex that makes sense because their average client spends four times as much per transaction, and has a much higher average income. It’s just maximizing their transaction fees.

There was a recent study that found over a third of all reward programs are never claimed. In the airline world, according to Consumer Report, over 75% of miles are never claimed. Stop chasing and start cashing out. You won’t be a prisoner to one company or another and will become a free agent that can get the best deal from any company. I’ve started cashing out my Aeroplan miles by getting $2,000 in Esso gift cards. Check what you can redeem for the least amount of points or miles. With Aeroplan, chasing a free ticket can be a fools game. Gift cards tend to be a good deal on redemptions. Amex gift cards cost 7500 points for a $50 card whereas the Esso gift cards cost me 6500 points each.

Three short stories…

Hurray for American Express

I remember last year having to contact their Call Centre. To start, there was a language barrier, to put it mildly, since their Call Centre is in India. And I started getting the rush treatment disputing a charge. You have to know that most of these staff are timed on a per-call basis. So their motivation is to end the call quickly – not necessarily to resolve it. Well, Amex has taken their staff off these timed calls. So far, the results are amazing for Amex. Their customer satisfaction levels are up, as is their charge volume per client.
Why can’t everyone realize that?

Which economic indicator do you trust?

There are two confusing economic stories from this past week:

Cosmetic surgeries were up 9% last year.
On the other hand, 60% of shoppers say they are buying more no-name store brands, instead of national brands.

Sony certainly has a big problem:

Sony Play Station’s main computer was hacked last month and banking and credit card information on 70 million customers was stolen. That’s a lot of people and it’s not an isolated story as more and more of our information is on-line. It’s another reason to be really thorough in looking through the charges on your credit card statement. Plus, you only have 60 days to dispute something. A day after that and you’re fully liable.

Four Ways to Keep Money in YOUR Pocket

A large part of our weekly tips involves keeping money in your pocket. So, today, here are four ways to do just that:

Are you interested in getting something done for cheap? These days, what do you actually get for five bucks? Well, there is a very cool new website called fiverr.com. For five dollars, there are a huge number of people who will do anything from critique your resume, to setting up and posting a You Tube video for someone’s birthday, or will build a one-page web site for you. The list of what’s available is endless, and there is also a section for you to post what you want done for five dollars, that someone can choose to take on. Check it out.

Cell phone two or three-year contracts are a really bad financial trap, that’s something we’ve talked about before. In the last quarter, 75% of Americans who got a new cell, or had their contract come up, did NOT sign for another contract, but went to a monthly plan. THAT is exciting, and a wave that will come to Canada with the new players now in the market. With no contract, you are not stuck for three years.

That is exactly why the I-phone is not the biggest seller, not even the 2nd biggest seller, because the only way to get one is to be locked into a contract! Many Blackberry and Google phones don’t handcuff you. Bet Apple isn’t that happy, either.

The reason the big companies want to hook you into a three year contract is that they are afraid. They are afraid that you’ll find a better deal, better service, or just afraid to compete in the marketplace. When the carriers have you hooked, it no longer matters that they’re not the best, cheapest, or whatever the issue, because you’re not going anywhere! I don’t use a cell much and loaded $100 on my pre-paid cell. It lasts me a year – that’s $8 a month!

Wireless cards for laptops are a great convenience. It means you can literally get on the internet anywhere, anytime. They’re reasonably inexpensive – on the surface. But be careful and watch the traps: A caller on the Clark Howard show had a $62,000 data bill. What did he do? He downloaded the movie Wally, for 35 minutes while vacationing with his kids in Mexico. The cell phone company who sold him the plan reduced it to $17,000. Isn’t that a deal? A $17,000 bill so his kids could watch a movie download.

The internet access is charged by megabyte, not by minute, if you do not have an unlimited use plan. Even then, check that you are not paying roaming charges when you are out of your home area. You’ll have to ask, because it’s not something they’ll volunteer to tell you when purchasing the plan.

An equally expensive story was that of a U.S. visitor using his Blackberry internet for 16 minutes at the Toronto airport and getting a $5,000 bill! Be careful and ask first!

Two University professors recently did a study that showed we spend more at Costco than we intended. Gee, we needed a study for that? Yes, it’s hard to get out of Costco for under $100. The way I do it, is to NEVER take a cart. When my arms get full, I stop buying more stuff, or change my priorities. No wonder that the average Costco store does $134 million in volume a year! But the good news is that their mark-up is always 14%, and Costco, on things like televisions, doubles the warranty period from one to two years. I recently bought my LCD using my Amex card, which also doubles the warranty. So I may have just turned a one-year warranty into four years. I’m not sure if the double Costco warranty doubles again with my Amex – and I hope I don’t have to find out.

Three Short Insights You Should Know

J.D. Power Fall 2009 Credit Card Satisfaction Survey

Each fall J.D. Powers conducts a very comprehensive credit card survey. It rates overall satisfaction, along with how happy cardholders are with their rewards, payment processing, problem resolution, customer service, and fees.

This year, American Express rated five stars, head and shoulders above other national card issuers in all categories. At the bottom of the bottom, with the worst score on customer’s satisfaction with their credit cards were Capital One, along with GE Money. GE is a surprise, as they handle the Wal Mart cards, and Wal Mart prides itself on great customer service! As to Capital One – what’s in your wallet? I hope it’s not one of their cards!

But the scary response to the survey was that 53% of us did not know the interest rate on their card, even though it is printed on every statement. Not knowing that we are paying around 20% on our credit cards is not good news!

Scotiabank can’t be happy with a bunch of national press recently. But there’s a great lesson for anyone over age 59 to learn! All banks offer seniors a no charge service banking packages, or greatly reduced service charges at various ages, but for most it’s at age 59. Barry Ashpole, a 66-year old college teacher, had the TD and Royal automatically lower his fees, because all the banks have your birth date on file. But Scotia kept charging him the full service charges for seven more years! When he discovered the huge overcharges, he hit a wall of no help to get this reversed, and fought it all the way to their Ombudsman’s office. At that point, he received a six month refund of $71. They wouldn’t refund the other six and a half years! You need to make sure you know when you are entitled to a break of the huge service charges, or you’ll get taken, as Barry Ashpole found out the VERY expensive way.

And a final update on your credit cards: Time and time again, I point out how critical it is to check your credit card statement line by line. Stuff shows up that’s not yours, merchants who accidentally, or because of a kinky staff member, charge things twice, and all kinds of errors can and do happen. But less than 10% of us look at our statement items – and that number is way lower if you get your statement on-line!

There is a phrase you need to know. It’s called post transactional marketing. You buy something from a retailer on-line, or join a web site. Often you’ll get a pop-up asking you to join a loyalty program for deals, alerts, or whatever. Be careful, because in many instances, these pages look like they come from the retailer, but they’re third parties, and deeply buried in the fine print is a note that you’re actually going to have a monthly fee charged to your credit card! And it’s not small business, but the 1-800 Flowers, Barnes & Noble, airlines, Priceline and buy.com sites!

Be careful, as these marketers have scammed people out of over $1.5 billion so far, Facebook has now been hit with a class action lawsuit, alleging that they allow, promote, or profit from these post transactional marketing, and the U.S. Congress is holding hearings on the issue.