Tag Archives: credit card limits

Three Credit Card Updates and Heads Up

The Bank of Montreal has a new cash back World Elite MasterCard out that they’re promoting pretty heavily. The card has 1.75% cash back, which is pretty close to the best in the country.

I was all excited until I did 30 seconds of math. The rate and terms are pretty much the same as every other card, but it’s a $120 annual fee. So if you take $120 divided by 1.75, you need to charge just under $7,000 a year to only pay for the annual fee. That’s almost $600 a month before you even get a penny of actual cash back. So, unless you’re a huge charge and pay it in full every month, the card doesn’t make much sense for most people.

Did you take my advice two years ago and get a Capital One Platinum card if you regularly carry a balance? If so, you and I have been getting a rate of prime plus one percent all this time! A 4% credit card was something nobody else could match and would have saved you thousands of dollars in interest. But that’s come to an end. I just received their notice it’s changing to prime plus 7%, which makes it a 10% card. Still a good deal, but a 10 or 11 percent card is something you can get in a dozen others, including the Scotia Value Visa as an easily accessed one. Here’s the link to a federal government comparison site that’s really worth looking at: http://itools-ioutils.fcac-acfc.gc.ca/STCV-OSVC/ccst-oscc-eng.aspx   If you can’t grab the link, search for Financial Consumer Agency and then search on top for credit card selector tool. There are (right now) 26 cards at 12% or less and 12 cards under 11%.

When you get this, or any, rate changes on a credit card you have two options: Do nothing and take the rate increase. The second one is to call them and decline the change in the rate. If you do so, they’ll cut off your card for new charges, but you can take the forever plan to pay off your balance at the old rate, as long as you make the minimum payment. If you chose that, just make sure you get another card right away before this one shows a zero limit that will significantly drop your credit score!

Last week a relative was checking into a hotel in Prince George. The lady in front of him couldn’t get her credit card authorized. She had no idea why, and was quite rattled needing to get her daughter to find the cash. Here’s what you have to know if your card is a lower limit or near the maximum: Use your credit card at a gas station and they’ll put a $150 hold on your card. Even if you get $20 in gas, the hold comes off your available credit. Rent a car and they’ll typically put at least a $300 hold on it. Then, check into a hotel and they’ll typically do a $150 to $300 hold, depending on the hotel or how long you’re staying there. That’s even if you’ve prepaid through hotwire or priceline. Three stops and over $600 of your credit limits are used up for no reason and in the first hours of your trip! The block comes off usually in three to five days, but that’s a long time if you’re on holidays without a second card or the room on the one you’re relying on.

Three Things I Didn’t Know

Wal-Mart, the world’s largest retailer has their own MasterCard. That’s something probably everybody knows as we keep getting pitched at the cash register. But I didn’t know that it is handled by Wal-Mart Canada Bank. Yes, Wal-Mart is a bank, something they got approval for in 2010. As of now, it isn’t a deposit taking institution but I wonder if they’re still working on that.

Virgin Money is Sir Richard Branson’s bank. Branson is best known for Virgin Air, Virgin phone, etc. He isn’t in Canada, but keeps talking about it, mostly because our pathetically small number of banks that automatically mean zero competition and huge fees and interest charges. I would love to have him come to Canada.

The one thing you know about Bronson is that he enters industries and everyone gets very nervous. Because Bronson is a huge believer in customer service and always approaches businesses from a totally different business model perspective. One of the features of Virgin Money is that it has facilities to quarterback family and friends’ loans. If you’re making a loan to a family member or someone you know, Virgin Money will do all the set up, paperwork, contracts, filing, signing and collections. I am absolutely dead set against family loans, but anyone who ignores me would have a great formalized way of doing it.

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.

What I didn’t know is that 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 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.

27 Years to Pay off That Credit Card

Hurray! Two of the credit card regulation changes are now here and on your statement.

Two months ago, we talked about some of the U.S. credit card regulations coming to Canada. They were effective last month, so you will see them on this months’ credit card bill.

The first one is called a minimum payment notice. On your statement you’ll see a box showing how long it will take you to pay off your balance at minimum payments. I had one faxed to me with a balance of $14,500. But are you ready for this: At minimum payments, it’ll take 27 years and a month to pay it off.

Yes, after the shock of that has worn off, you can react one of two ways:

One way is for you to get so mad when see that box, that you’ll do whatever it takes to pay as much as you can, AND to stop using the card for 90% of the daily crap that runs up your balance the quickest.

That’s the consumable stuff that has no business being financed, such as groceries, gas, restaurant meals, Tim Horton, cigarettes, or a trip to the liquor store. All of those are consumed long before you even get the credit card bill. But they’re all financed now, running up interest, and being owed for years and years. That’s insane. If you just switched those to a debit card, your credit card balance will drop a lot, AND you’ll be paying for things as you’re using them.

The second reaction can be that, well, I never pay the minimum payments. That may be true, but aren’t you also still using your card and increasing the balance? If today’s 27 years seems like a lot, odds are, it’ll increase as your balance goes up.

Paying extra is great, but how much extra do you pay to actually get some traction? This minimum payment warning chart has always been in the back of my: It’s Your Money book. And look at the chart with it. If you keep your payment the same as this month, and add just $20 a month, the 27 years becomes less than four years to pay off the balance. THAT is worth knowing, and worth doing.

The second part of the legislation is that card issuers can no longer just keep increasing your credit limit. That’s a blessing, because this person’s statement I have in front of me is for a $23,000 limit, but that’s more than this person earns in a year! There is a big note at the bottom of the statement now that says: Congratulations! You qualify for a limit increase. To accept this offer, please visit our branch or contact the Call Centre.

Don’t do it. The last thing anyone needs is another limit increase, another temptation to spend more. You know they’re going to contact you, if you don’t get to them. Because the card issuer really really wants you to owe as much as possible to make sure you can only make minimum payments. Why? Because then you really will have to take that 27 years to pay the balance. And that’s how lenders maximize their profits. What? You thought any of them were in business to help you? Get real and wake up.

I Didn’t Know – But You Need To!

I would bet that the two fastest changing industries are probably the medical field and the world of finance and credit. What was true one month gets changed, amended, legislated, or moved around, in one way or another.

Over the last couple of days I came across a number of things that are brand new, and that we all need to know:

-Scotiabank has changed their credit card agreement. That means others have, or will, follow soon. Starting in September, if you miss, or are late, on three payments in any 12 month period, your rate will go through the roof. The statement I saw jumps it by 7%.

-The two-tier interest rate charges started in the U.S. and is now here. Along with that, you will no longer receive credit limit increases automatically. You will now actually have to OK them. And that’s a good thing. Almost none of us NEED a bigger limit. The card issuers will send you the limit offer and you can accept or decline. Of course, you can still contact them to request one, if you need to.

-Scam phone calls are something that happens to millions of people. But you can no longer rely on call display for the accuracy of the number popping up. With internet calling, fraudsters can now spoof phone numbers being displayed to read almost anything they choose. You THINK you’re getting a call from your bank, because that’s what it reads on the call display, but it’s not. Always, always, get their name and department, hang up, and call the number on the back of your credit or debit card. It is the ONLY way you know you are actually reaching your bank.

Millions of us deal with Shaw, as do I. But I found out two days ago how nasty they get with one month past due. My company pays the bill, but there wasn’t a statement in April. May got paid, June got paid, July got paid, but it was always dragging by a month. My fault – no doubt. But they simply went in to disconnect my internet one morning.

All companies love you when you pay – and I’ve paid them close to $30,000 over the years, but don’t care when there’s a slight problem – no matter what the reason. Media relations chose not to respond to my inquiry, but their computers can only tell I’ve dealt with them since September 2008, instead of April 1995. Whether it’s Shaw, your bank, or your mortgage company – they’re ruthless on any past due amount, no matter what the reason, track record, etc. So, as the kids say: Don’t go there.