Tag Archives: credit card limit

Change Of Plans: Your Bank Wants To See You Again

With new credit card legislation a couple of years ago, card issuers can’t increase your credit limit without your consent. Remember that their main goal is to have you owing the most amount of money and making the smallest payments. THAT is how they maximize their interest income.

These days, you’ll get a notice on your statement that you qualify for a limit increase – you just need to call. Or they’ll send you a separate mailer, and may even phone you from their call centre. Don’t do it – unless your limit is really low, it generally becomes more temptation.

The trend of getting you out of the bank and to the ATM machines is changing. Think about it: They can’t solicit or sell you very well if they can’t see you!

When I was at one of the big no-service banks last week, I overheard the teller next to me tell people: My screen just showed that you qualify for a limit increase on your card. Want me to go ahead and put that through? Is that clever or what? And in the few minutes I was there, this teller was three for three. She converted all three people she asked to a higher limit. Great for the bank…often not so great for the person thinking they’re being flattered. Scotiabank does it through their ATM machines. If you’re up to bat, they’ll have a screen that advises you that you qualify for a Visa limit increase and just click here. However, it’s not as effective as seeing you in person.

What the banks want to do is to make you sticky. That’s bank slang for having you deal with them on as many products as possible. The more diverse business they get from you, the lower the odds are that you’ll ever leave them. If you have an RRSP, your mortgage, savings, a term deposit, your checking account, and a credit card, they’re betting you’ll never go through the hassle of shopping around and moving somewhere else.

Financial Trouble for Seniors?

Anecdotally, more and more stories are showing up about the financial troubles of seniors. These range from bankruptcy filings to collection troubles and living life below the poverty line. That’s pretty serious when those who have worked hard all their lives are having significant troubles making ends meet. However, it started way before retirement:

An RBC Consumer confidence index earlier this year found that 57% of us have nothing set aside for an emergency. If there’s not even a one-weeks’ pay set aside, what are the odds those people have any retirement savings?

Then there was a study a few years ago that almost 50% of us do not believe that a debt-free retirement is a must. I was somewhere between stunned and in disbelief. Is that really true? Do we believe having a bunch of monthly payment is OK when we reach the point of living on a fixed income and there’s no more extra money coming in? Or have we just thrown up our hands and given up and given in – to the fact that we’ll never be debt free? It’s just so wrong, and so dangerous, to carry any debt into retirement, because your golden years shouldn’t be spent working at the golden arches.

The biggest pre-retirement step you have to take is that your retirement savings have to come ahead of helping your kids with university costs or other loans or gifts. There are a number of ways to pay for university, but there is only one way to save for retirement, and that is you and your savings. You cannot help others if you cannot help yourself. If you are already retired:

-Cut up your credit cards: At 19% interest they are way too dangerous, and even the minimum payment is robbing you from money for necessities. Never mind that the balance will become almost impossible to pay in full. If you’re going to ignore that advice, at least call them and get your limit reduced to $500 or $1,000.

-Do a budget: You need half an hour to put in writing where your net income is going. Start with the priorities of shelter, food, utilities, medical expenses and the likes. THAT is how you will need to spend your income. It cannot be making a credit card payment first. If the card goes in arrears – so be it.

-If your kids owe you money you need to have a family meeting. Get them in the same room and explain the reality of finances for a retired person. Put the pressure on and demand to get paid back. The niceties are over, it’s time for them to grow up and pay up. You can’t care any longer if they get a loan, line of credit or put it on their credit card – you want to be repaid.

-If you have payments on a vehicle, it has to get sold – today. Those payments are a budget killer for everyone, especially those on a fixed income. You can’t afford them.

-If there is a possibility of collections down the road, your savings and pension money has to be in a bank different from the bank who has your credit card, line of credit or overdraft. Banks have the right to just grab your savings to offset what you owe them. Before that happens, move your money to a financial institution where you do not have any borrowing. It’s critical that you do this or they will wipe out your savings to pay themselves back.