Tag Archives: bank marketing

Zig When Banks Want You to Zag & Adulting 101

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Last month we talked about a survey that showed 8 out of ten people want financial advice from their bank. Great idea – from the wrong people! Getting financial advice and learning the insights is a great ideal or it’ll cost you huge. But don’t get it from people who are on commission. Here’s more proof of that going on right now:

Interest rates are stable and heading down. The Federal Reserve in the US will start dropping them before Canada, but they will come down in both countries. I first mentioned that we will be going into a recessing last fall already.

What are all financial institutions advertising heavily right now? Getting a fixed longer term mortgage at a “special” rate. OK, rates are coming down – so the WORST thing to do is lock yourself in right now at higher than need be rates! Banks want you locked in for five years or longer. That way, when rates come down, you’re way overpaying and it’s their additional profit.

What you do not hear from any of them right now are any ads on GICs. Why? Because if you lock those in right now you’ll get the higher rates before they drop. That’ll make you money but cost the banks a significant amount of profit: You get the high rate – they have to pay it while prime rates are dropping.

Adulting 101 Course

What a great idea! And it’s something four or five parents or grandparents can do together this summer: An Adulting Boot Camp. A high school in Lexington Kentucky this year started a three-day adulting 101 course for grade 12 students. Day one is all about money, day two is home & health and day three is being a professional. It’s everything from budgeting to saving, how to do laundry, basic cooking, car maintenance, ironing a shirt, shaking hands, making eye contact, tucking in your shirt, leaving your cell off during an interview and a ton more.

I love it love it love it! They may seem like such no-brainers to us older generations, but it isn’t in any way shape or form for 18-year olds!

George Boelcke – Money Tools & Rules book – yourmoneybook.com

A Lot of New Stories This Week

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Starbucks, as if they didn’t have enough problems in a recession where people aren’t interested in spending four bucks for a coffee, had a big hiccup on the May long weekend. More than one million customers who paid with credit or debit card were double charged because of a computer error. The company fixed it internally, but it’s another reason to always, always check your statements!

An old 1980’s scam is back that you should make sure you know about. It’s that you’ve won the Jamaican lottery. But you need to first pay for the transfer funds. Sorry, you didn’t win – honest, but this fraud has really taken off again. In fact, gangs in Jamaica are killing each other in fights to get the sucker and reload lists, it’s that hot.

Bankrupt General Motors is cleaning house some more. They just sold their Saab division, which apparently never ever made a dime of net profit for them. OK, and they didn’t actually sell Saab – they gave it away to a small Swedish luxury car maker.

President Obama is proposing a new consumer legislation agency in the U.S. If it passes, and that’s not a given, one big goal of the agency is that disclosure on credit cards and other products be in plain language. The goal is to have any disclosure written at a grade 11 level, one page or less, where someone can read it AND understand it in less than four minutes. Now that’s a great goal.

Have you noticed that the big no-service banks are now in the product sales business in a bigger way? In a mailer this month from the Scotiabank, I received a flyer to buy a Garmin 255 GPS. Why is the bank selling GPS systems? Their price is $300, while Amazon sells them for under $200!

Last week’s American Express rewards catalogue had something I would really really like to buy with my points: A new 2009 Elise SC sports car from Lotus. It’s 14.2 million points. You might guess I’m a little short. But I’d like to know who runs up over $14 million of charges on their American Express!

There was a survey a couple of weeks ago that should be great news: When the economy recovers: 25% of people said that they will return to their regular spending habits, but 61% said that they will stay with their reduced spending and budgeting.

Would you like to have lunch with Warren Buffet in New York? Sure, who wouldn’t! It’s a fundraiser auction for the Glide Foundation and you can bid on E-bay until this weekend. But before you log on: Last year, the price was $2.1 million! It’s for you and seven of your friends. So if you do bid: I would love to be your friend!

Poor retailer Eddie Bauer. They went bankrupt for the second time in four years last week. This time it involves about $420 million in debt. Gees, you’d think they would learn the first time that heavy borrowing doesn’t work. But then, it’s another retailer that we can learn from, because, over the long term, debt doesn’t work for us, either.

The Power of Marketing

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This morning, I’m not making a shot at the mega-bank managers, but just want to look at their marketing department and advertisements.

Scotiabank says you’re richer than you think. Now THAT is something I like to hear. But I believe that kind of optimism leads us into debt and most people are actually poorer than they think with not enough retirement savings or even an emergency account. Now if they want to make me richer, how about a lower credit card rate and dropping some of those service charges and fees? And their ad on the ATM machines say: Get ahead with good borrowing choices. Now that’s a no-brainer oxymoron isn’t it? If I’m richer than I think, how come there are so many ads wanting me to borrow? Does that help me get richer?

The Royal has ads that say they have the answers to questions I’ll have next week. Oh really? One says: yes, Gerry in Georgtown, you can afford that variable rate mortgage. Hmm…you have no clue who I am, what I make or what my credit score is, but you’re telling me I’m approved AND that I should get a variable rate? That sounds exactly like what happened in the U.S with their mortgage mess, adjustable mortgages and everyone qualified, doesn’t it?

Posters all over the BMO branches promote shoulda, woulda, coulda with the line: you can, with a homeowner readiline. Should, could go into debt with a line of credit secured by their clients’ home? How about should save, could get out of debt and WOULD if they wouldn’t market debt so heavily!

The CIBC says deal with them “for what matters.” But what matters to you and me versus the bank is probably quite different. That’s their slogan and now they’re promoting getting a free fridge. Yes, if you move your mortgage to them AND get a line of credit – so up your home debt beyond just your mortgage they’ll give you a major appliance. I can assure you if I were to walk you through the math it’s NOT a free appliance, honest!
The TD has a cash-back mortgage. Sign a 7-year loan and they’ll give me 7% cash back. So I can walk out with $14,000 if I sign a 7-year mortgage for $200,000? If that sounds like free money you need to give your head a shake because it’s a much higher rate.

I’ll put the math on the web site under tip of the week, but the bottom line is that your payment on this cash-back mortgage will now be $201 higher and at the end of that seven years, your balance will also be over $5,000 higher. With some simple math, that $14,000 free money works out to paying just under 14% for it. Not exactly free because a line of credit would cost you about a third of that interest.

$200,000 mortgage on a 7-year fixed term:
Cash-back rate is 7.95 so the payment will be $1,520
Balance at the end of 7 years: $175,865
Special rate mortgage would be 6.33% at $1,319
With a balance at the end of $170,805
So it’s $201 more a month times 7 years times 12 months a year or $16,884 more
And the balance is higher by $5,060.

That makes it $5,060 higher balance + $16,884 more in payments for $21,994 to get the $14000 up front, translating to a 13.85% interest charge on that money.

But here’s the winner of the most stupid financing ad: It’s an investment firm that wants you to re-mortgage your home so you can invest with them. And their tag line in the ad: “Don’t let all your equity stagnate.” Stagnate? Sounds like three week old bananas or moldy bread. I thought equity was a good thing and the goal was to get the biggest equity in the world – that’s called a paid off home. Here’s some firm doing whatever they can to have to finance more and more.

THAT qualifies for the stupid award – hands down!