Category Archives: Blog

At TD, A 45 Cent Short NSF Is $96 In Fees

Yesterday brought a tiny victory to consumers on something that’s mostly ended in the U.S. for some years. The Ontario Superior Court approved a settlement with TD Bank for not fully disclosing that an NSF for one item triggers two NSF charges.

The lead plaintiff in the class-action lawsuit, Tyler Dufault, was 45 cents short on an auto payment from his account. As a result, the item bounced (NSF). But creditors have the ability to re-try/re-process it a second time. Thus, the TD charged two NSF fees of $48 each. Bottom line: 45 cents short in his account triggered $96 in NSF charges.

The class-action lawsuit related to improper (or no) full disclosure to customers that two NSF fees can be triggered. Of course (surprise!) the TD did not admit to anything but settled the class-action suit for $15.9 million. That’s like you and me paying a nickel as TD had annual revenues of $75 billion last year! Lawsuits against all other major banks are ongoing.

If you are one of the 105,000 people caught in this by the TD between February 2, 2019 and November 27, 2023 the settlement will be $88. If it’s happened at one of the other banks, stay tuned for their likely settlements.

According to the Consumer Financial Protection Bureau in the U.S. the average cost of processing an NSF cheque is less than one-half of a penny ($0.005), since it’s entirely automated. Yes, this is one of the predatory charges of banks in general until the Federal Government steps in as they did in the U.S. No – getting an overdraft is a very bad idea with the staggering rates and fees.

Ironically, both the TD and BMO in the U.S. do not charge NSF fees to their southern customers. But here…well…if they can – they will. Will any of the banks change their policies? Not hard to guess that that’s a firm NO. They’ll add two lines to their five to 10 page account disclosure and carry on double charging. Sick, sad but true.

Have Some Mattress Money?

While GIC rates are still pretty high, but dropping, it might be a good idea to consider what to do if you have any money under your mattress, too much in your checking account, or sitting in a bank savings account.

No, that wouldn’t and shouldn’t be investment money. That’s your retirement investment. But that definition is for any money you will not need or touch for over five years. The money you’re saving for a down-payment, a newer vehicle, home renovations, or other things is money you should not be investing as you’ll want access to it in less than five years.

The most effective way to have this money earn some returns is to ladder five GICs. Let’s use $10,000 as an example: Get five GICs for $2,000 each. A one year, two year, three year, four year and a five year one. That way you have access to a fifth of it every year. Right now, a five year GIC is still about 3.75% and a one year (if you look around) still gets you around 5%. Just make absolutely sure that you have it in writing that the maturing GIC does NOT automatically get renewed. No, them telling you doesn’t count. No, their comment that they “never auto renew” is a lie and doesn’t count. You need it in writing that the maturing GIC will be deposited into your checking or savings account. If it’s not in writing it does not count. On two previous occasions I’ve had to get a lawyer involved when GICs for a relative and acting as an executor were auto renewed and the bank attempted to tell me that I was out of luck. And that was WITH written instructions, dated and noted as to who it was given to!

Oh, and none of this matters or applies if you have a credit card balance! Hunting for an extra quarter percent return when you have a 20% credit card rate is crazy! See the Money Tools book chapter on credit cards: How to get a guaranteed 50% return (by paying off your cards).

Two Updates:

Ford F150 Lightning: Last year we talked about the new electric vehicle (EV) that had a massive amount of pre-orders. Well, fast forward to the fall and it appears the novelty and excitement have worn off. I have to admit, EVs still aren’t ready for prime time or trustworthy use – and probably won’t be for at least five years or so.

One of the stories on the all electric F150 is on youtube from CBC TV. It’s a short three minute nightmare story of a family from Winnipeg wanting to just drive to Chicago: No charging stations, no range, needing a hotel and eventually renting (yes renting) another vehicle to finish their trip.

That was followed last week by a Marketplace segment (S51 Ep9) testing a Tesla on a simple 400km trip. With a range of 425km that should have been possible. Not even close due to cold weather which, experts say, reduces battery life by around 50%. No, the range advertised isn’t even close to reality in cold weather. But manufacturers aren’t required to do testing and supply range in anything but ‘ideal’ weather. Plus very few charging places and 7 of the 12 they tried didn’t work. Oh, and a huge range of prices to charge an EV. But there’s no chance to shop around when it’s the only one even working and available…

There’s no chance I can afford or justify an EV. That’s a money and spending issue that others may not share. But as EV stocks are tanking and one manufacturer after another is announcing they won’t make targets, it’s clear people are voting with their (not) buying decisions: Range anxiety, no place to recharge, and a good chance you’ll be getting a hotel room to make your daytrip. No thanks…

Three-year cruise: Also last year there was a company marketing a three-year cruise that we talked about. It made for a lot of dreaming and wishing but it was cancelled.

No reports on their pre-sales but the company announced that they were unable to lease a cruise ship. So they did all this without getting a ship booked or optioned first? Gees…But not a surprise as cruising took a big hit during Covid and people were still not willing to get back on the seas in early 2023. This year will be pretty big for the industry. Sadly that’ll translate to very few deals…

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…

Do You Have a 50% Credit Card Rate?

If that sounds insane, it really isn’t. Millions of Canadians have it – they just don’t know it!

Numerous surveys over the past few years show that one quarter of Canadians are cashing in some of their RRSPs before retirement. That’s more than 1.8 million people. Say it ain’t so as the old expression goes.

Two of the most common reasons for you to consider cashing in all or part of a retirement plan are to purchase a home or to pay off debts. Let’s assume you want to cash in $5,000 to pay off a credit card. The first thing you pay is a 10% penalty right off the top. So you’re actually getting $4,500. Then this amount is taxed, as if you made that money as income. In a 30% tax bracket, that’s another $1,350. So the bottom line is that the $5,000 you cashed in is really only $3,150 of net money going on your credit card. Sure, it’ll save you 20% interest on the card, but that’s not the whole story.

That money is no longer growing in your RRSP (or your Tax Free Savings Account). At a 10% return, that $5,000 would have doubled every seven years. If you’re in your 30s, you’re now missing around $160,000 at retirement. If you’re in your 50s, that $5,000 still would have doubled three more times, which is $40,000 now gone.

While you’ve now been able to pay just over $3,000 on your credit card, it likely didn’t pay off the balance. That’s bad enough with what it’s cost you in foregone investment income. Now to make things worse, the majority of people keep using that credit card again! Odds are, you’re in the majority where you’ll be back to an average $7,000 balance within two years.

That puts you back to paying 20% on your card while you’re out at least $40,000 in savings for the next 20 years. The bottom line: Your credit card is then costing you more than 48% interest. While you were hoping to make things better – they got worse – a lot worse.

On the plus side, how would you like a zero risk 28% return on your money? It’s easy: Just pay off your credit card. The 20% interest rate you pay is with after-tax money. So the real rate is over 28% if you carry a balance. That’s the biggest reason trying to save at the same time you’re trying to become debt free doesn’t work!

Paid Off Your Car Or Credit Card? Keep Paying!

Twice in the last month someone shared with me that they had paid off their credit card or car loan. Both times, I had given them some feedback a year or two earlier and now they were sharing their victory!

Great…but: Here was my next challenge to them. It’s explained in the Money Tools book, but it’s not hard to understand the logic.

When you’re done paying something off, you now have a freed-up $300, $400 or whatever you had been paying each month. But what will happen with that “extra” money? It’ll be gone! Take your had out of a bucket of water and then measure the hole that’s left. Exactly…the “free” money will go to something, everything or whatever the next month if you don’t have a plan.

And the plan is super easy: Keep making the same exact payment for another year! You were disciplined enough to pay off the credit card, car or whatever – so stick with it another year. Nothing to re-budget, nothing to force yourself to do – just carry on!

But now you’re paying yourself. Transfer the money to a savings account the same day your bill was due, the same amount, the same routine. If it was for a car, a year from now you’ll have four five or six thousand saved for a newer (never new…please!) one. If it was a credit card, you’ve got two three or four thousand towards retirement savings or another card or bill.

It’s magic and it’s super easy. But it takes knowing this trick and something few people still have: The will to take delayed gratification!

Avoiding the “Stupid” New Year’s Impulses

Here we are the week before New Years and most of us want to, or feel the peer pressure, to start making resolutions for 2018.

Whatever yours may be, stop for a minute and make sure they’re not stupid or irrational things you do, or say to yourself.

The stupid things many people can do is to get super excited about getting fit in the coming year. The resolution is great – but signing a two-year fitness club contract falls under the category of stupid. If you can go for a two-month trial or on a month-to-month basis, it’s great. If you’re on a contract for a thousand bucks or more, it’s a really bad idea.

A second big one is doing serious damage to your credit score. If your mortgage is up for renewal, you’re looking to buy a home, or want to finally get your line of credit rate reduced, don’t borrow until that’s done. When you take on a new debt, the inquiry into your credit bureau can drop your score and your new debt will lower it in two other ways. Stay away from new debt if refinancing, a mortgage renewal or anything like that is on your radar within six months.

Under the category of stupid things we say to ourselves, the most common one I hear someone say is that “they got ripped off.” Sorry, there isn’t a sales person or retailer in the province who has a gun to your head. You didn’t get ripped off as much as did it to yourself. You shortcut getting another quote, you made an impulse buy with a finance contract, you didn’t shop around, etc. etc. But as long as you say to yourself and others that “you got ripped off” there’s no personal accountability. After all, if it was someone else’s fault – there’s no lesson for you to learn. If we change the wording to “I let myself get ripped off” that’s a powerful change in your thinking and in your actions the next time!

The second big way we sabotage ourselves is with the words “I can’t.” Of course you can. I can’t save, I can’t get my credit card balance down, etc. Yes you really can. But again, when you think like a victim – you’ll end up being right. If you stop using your credit card for a while, grade one math says your balance will drop with each monthly payment. So don’t sabotage yourself from the start and start thinking about how to turn the “I can’t” into “I’m going to.”

Gift Cards and Easing Into New Year’s Resolutions

There’s a good chance you were on the receiving end of some gift cards this Christmas. With billions of dollars sold,  you need to make sure you actually redeem them. Over 8% aren’t ever used – great for the merchant to get the free money – not so good for you.

The best tip is to get a felt pen and write the amount on them. Then tape them on the fridge, put them in your wallet, or any place prominent so you won’t forget. Remember that you have an IOU and that’s only good as long as the store or chain is still in business. If it’s Tim’s or Walmart – not a rush. But, the smaller the store, the quicker you want to use them up.

If you don’t use the full amount, write what’s left on the card as well. If it’s down to very little, do what I do: Just hand it to the person behind you in line and tell them what’s left on the card. That way they can redeem it right then and there.

Today and tomorrow, it’s likely everybody will make their New Year’s resolutions. But studies keep showing half of them are toast by the middle of January. News flash: You won’t run a marathon this summer, lose 60 pounds by April, or become debt free next Tuesday.

So perhaps you can resist the pressure to set New Year’s resolutions that are destined to fail. How about you do a two-month test drive on some smaller ones? If they’re specific, in writing, measurable and short-term, there’s a much better chance you’ll keep them.

Want to save some money? How about just taking the $200 or whatever you want to save each month and taking it right out of your ATM the 1st of January? Put it under your mattress or wherever. Do it for two months and you’ll see that you really won’t miss it. Good chance you’ll keep that two month trial going….

Can you take your smallest debt, perhaps one of your credit cards, and pay it off by March 31st? It’s the smallest, so no need to freak out or sell everything on Kajijji. If that worked out – great! That bill is now gone – permanently. Since your subconscious mind now knows you can do this, take the next smallest. It might take three or six months, but it’s just one debt, just one payment – you know you can do this, too.

Want to save some serious money for the next two months? Can you avoid restaurants or bars for 60 days? Of course you can – but will you? We average $190 on those each month. There’s around $400 or more by figuring out how stuff in your fridge turns into food, instead of having others make that happen for you.

Test drive some small ideas for two month. It takes 21 days to form a new habit. 60 days is long enough to see if you’ll stick to it for longer. No pressure…it’s just you and your money, debts, and disposable income. Happy New Year!

PS: Just saw a great Facebook post: I’m opening a gym called “resolutions.” It’ll have fitness equipment for the first two weeks and then it’ll turn into a bar for the rest of the year.

 

 

 

Wishful thinking versus goal setting. One is a hope and a dream that someday, something will change. Goal setting is in writing, specific and measurable.

I love my GPS. I travel a lot and can’t imagine life without it. But I can punch in all the destinations in the world, it won’t work if I don’t first know where I’m at! That’s the same with your financial goals.

 

If you’re not willing to take the 20 minutes to write down…don’t bother – you’ll just be staying in “hope” land. It would be kind of like firing a gun into the air and hoping a duck will run into its path.

The (Now) Con Of Fuel Surcharges

When gas (and diesel) prices started going up a few years ago, almost every company starting adding so-called fuel surcharges. From airport shuttles to Canada Post and thousands of other companies in between, this became a major revenue (or expense reimbursement) stream.

Want to bet if this is ever going to go down or away? No chance. Yet, gas (sorry if you’re still in a high tax/high gas jurisdiction, is close to being back under a buck a litre. This was my price yesterday!

Yes, the fuel surcharges for deliveries to businesses is constantly adjusted. We’ll never find out or know if this significant saving is being passed onto us consumers. But don’t bet on it. If the retailers don’t have to pay it out and can keep their prices the same (or still raising them), that’s a massive source of new profits.

For us consumers paying them directly, I’m never a fan of more laws. However, when do we reach the point where we’re getting ripped off for fuel surcharges on gas that’s LESS than it was when these fees were invented? It’s not like we have a choice but to pay them and it’s so pervasive that they’re almost impossible to avoid by dealing elsewhere!

Christmas Weight, Bills, Spending, and “Stuff”

On average we gain seven pounds (three kg) between Halloween and New Years. I wonder if we don’t lose a thousand bucks on Christmas stuff. Then, according to fitness experts, it takes us an average of five months to lose that weight. Well, according to financial studies it takes even longer to get the Christmas spending paid back: It takes until June on average.

But every year I’m reminded that most of what we buy, not just at Christmas time, is just “stuff.” And that’s not what Christmas is, or should be all about.

A few years ago, after decades in our family home, my parents could no longer handle the physical upkeep of a large single family home. It turned out that the trauma of selling our family home wasn’t nearly as bad as what us “kids”, now middle aged ourselves, had to do in order to make it happen.

 One Friday we ordered one of the big commercial dumpster bins to be delivered to the house. After giving away stuff  that our family members, friends and neighbours wanted, we knew there’d still be a lot of things that had to be thrown out: From sleeping bags to tools, furniture to books, and extra dishes to everything else, none of these could go into a one bedroom nursing home unit. What we weren’t prepared for was the visual impact of a huge and full bin being hauled away, then a second bin, and even a third bin. In total, the stuff accumulated added up to over 14,000 pounds – in the dump. Few things in life have had such a powerful and visual impact on us.

 Literally hundreds of thousands of dollars of stuff, purchased one at a time, over a lifetime, ended up as 14,000 pounds of trash. It sure put things into perspective. You’ll now understand why I’m just not that excited about buying that newest whatever, the next model of some gadget or another, or running up my credit cards. (Money Tools & Rules excerpt page 216)