Tag Archives: credit card disclosure

The Fine Print Of Reward Credit Cards

A few months ago we talked about CIBC’s switch from their Aeroplan card to their own Aventura card. CIBC wants a card that can be used for any travel, instead of just Aeroplan points. It’s likely you’ve seen the cute penguin commercials as their $50 million launch campaign is well on the way.

Since I’m likely the only person to ever read the fine print of credit card disclosure, I wanted to highlight some of it for you. The disclosure on this card is 8.5 size font and over 3,000 words. That’s what makes me pretty sure I’m one of the few people to read it. This is from the Aventura card, but the fine print is pretty standard for all cards and the details and traps of the perks are roughly the same for every reward card.

You’ll earn one point for every dollar you spend on the card. So if you want a travel reward that’ll take 50,000 points, get ready to charge $50,000 on the card!

The card has a $120 annual fee and a 20% interest rate. That’s pretty much the same as others. So make sure you only get this type of card if you’re always paying off the balance in full. If you often carry a balance, a 12% card with no annual fee will put you light with no annual fee will put you miles ahead of trying to chase points and paying interest AND the annual fee! In other words, the saving on interest and no fee is money you can use to buy your own travel at less cost.

Travel cards generally advertise that you can fly anywhere and anytime with no restrictions of any kind. Well – not quite. The fine print states that ‘flights are not available at the lowest point level to all destinations, or at all departure times. So you thought it’d take you 25,000 points to fly to London. When you go to look or book it may turn out that the point level to get there is actually 50,000 and…well, you’re not going anywhere. You also need to remember that the points required can be increased at any time without notice. It’s in section 34…if anyone gets that far in the disclosure.

If you’re close, the card lets you buy up to 20% of the points you’re short. The cost is 3 cents per point. But that’s only if you’re close to getting the travel reward you were working towards. Using your points is at 2 cents per dollar.

If you’re not up to date in your payments one month, it’s not likely you’ll get the points for that month. If you get tired of paying the annual fee and close the account, you have 60-days to redeem your points or they’re wiped out. If the card issuer closes the card out from under you, you lose all the points immediately.

Starting to see why Consumer Report found that 75% of airline reward miles never get used? Before you sign up for any annual fee travel card, stop and do 30 seconds of math:

How many points will you need to go where you want to go?

How much do you charge on the card per month?

If you need 50,000 points and charge $1,000 a month or so, it’ll be 50 months before you have enough points. That’s the 5th year. Plus, it’s assuming the point level never increase in those five years, which is pretty small odds. So you’ll pay $120 annual fee times five years, which is $600. Do the math: Are you sure it wouldn’t be cheaper to pay cash?

A Credit Card Issuer You’ve Never Heard Of…

Even if you’ve never heard of GE Money, there’s a good chance the company is in your wallet.

GE Money is huge – bigger than a lot of banks. They handle the back-end credit card operations for a lot of retail chains such as Low’s, Amazon, Toys R Us, Chevron, Texaco, PayPal, and Wal Mart in the U.S. to name just a few.

With the heat, media attention and privacy concerns, GE Money recently added one of those little addendums to your account terms in your statement. They’re not alone, but theirs in one that was given to me. The new disclosure states that they may use external service providers. In other words: They can outsource. This outsourcing will “process information on computers located outside of Canada, including the United States, Mexico, India, and the Philippines, whose data protection laws may differ from those in Canada.” You think?! Then they go on to explain what that means to you and your credit card information, which may be subject to access requests from governments, courts, etc. according to THEIR laws.

In other words, it’s the privacy laws of those countries – if they have any, and not those of Canada. This little insert – all inserts – are valid to change the terms and conditions of your credit card agreement. If you use the card after the notice, you’re agreeing to be bound by the new terms and have given your consent.

If you see one from the big banks, care enough to share and send me an e mail. You have to know that the big banks need the protection of this clause just as much as GE Money.