Tag Archives: student credit cards

Eight Financial Legislation Changes That Would Really Help Us

Recently NDP leader Jack Layton held a press conference here in Edmonton to put the spotlight on credit card issuer. Mr. Layton comments focused on the high merchant fees and on credit card interest rates.

He’s half right, and half off the mark. The merchant fees that retailers have to pay in order to accept credit cards average around two percent. In addition, there are also a ton of other fees which add up to another one or two percent. They’re not optional, because it’s impossible for a retailer not to accept credit cards, they keep rising, and they are certainly built into the retail price of what you and I pay.

The issue of credit card rates is another matter. I’m always hopeful that Mr. Layton will use the massive media attention he can draw in a positive and constructive way. But, once again, I was disappointed. Two years ago, Mr. Layton called for the elimination, or drastic reduction of ATM fees. Sorry, but an ATM fee is a “lazy fee,” as we discussed at the time. Nobody has to pay them, if they just go another two or three blocks to their own bank machine where there’s never a charge.

Mr. Layton wants the government to force financial institutions to have at least one credit card at prime plus 5%. Sorry, but with write offs and other costs, that can’t happen, and won’t happen. But then, for anyone carrying a balance, there are cards with 11% rates out there. If you are going to carry a balance, it’s a quick fix to change from a 20% card to the low-rate card. Forget the perks and points. Most are never claimed in the first place, the worst of which are airline miles. where Consumer Report found that over 75% are never redeemed.

There isn’t a law that says you HAVE to use your credit card. It’s your choice and it’s one of the most expensive ways to finance things.

If you carry a credit card balance – stop using it until it’s paid off! Broke people can’t keep spending! We’re at 150% debt to net income – and it’s getting worse, and we’re now more broke, and saving less, than Americans! No law Mr. Layton may want to pass will stop broke people from continuing to dig their financial hole deeper and deeper.

Needless to say, I would do anything to get one-one hundredth of the media attention Mr. Layton can garner to make a difference in financial education and to actually help families. Mr. Layton missed a great opportunity to shine the spotlight on financial issues that matter and that can, and should, be addressed.

How about some legislation that Universities and Colleges can’t sell their student lists to credit card issuers? It’s our educational institutions selling out their students for a kick-back.

How about that you actually need a job to get a credit card, and preventing them from being issued to students until age 21 and with proof of an actual income?

How about changing the giant rip off of mortgage insurance with CMHC? CMHC has $8 billion in net assets and made almost a billion dollars in 2009. Yet we have to pay the insurance on less than 20% down payments. In the U.S. it’s monthly premiums until you do reach the 20% equity. At that point, the premium charge stops.
Here in Canada, it’s entirely front loaded, and adds $14,000 to $18,000 in costs to the average mortgage.
How about re-starting Bill C27 that died, making it a criminal offence to steal someone’s identity, with up to five years prison?

How about a credit freeze law that allows individuals to totally block their credit report, making it impossible to be the victim of identity theft? Because it’s the ONLY way to accomplish that.

How about legislation that forces financial institutions to advice customers when their transaction will trigger an overdraft with huge fees? This opt-in rule would be a no-brainer in having an ATM screen display that you are about to go into overdraft with this withdrawal.

Better yet, how about matching the U.S. legislation that requires customer consent before every allowing an overdraft? That way, people can’t be trapped into huge overdrafts they never consented to.

And back on credit cards, how about restricting the $30 or $40 over-limit fees to a percentage of the balance, or requiring specific customer permission before over-limiting the account in the first place? Right now, a $2 coffee can trigger a $30 overdraft.

How about championing a consumer bill of rights, including the right or ability to speak to a human being at the credit bureau with inquiries, or concerns about their credit file. Because, right now, one-third of files have errors serious enough to prevent obtaining credit.

Those are eight reasonable and reasonably simply issues that can be passed through the House of Commons and become legislation. Unfortunately, they are certainly not as sexy as talking about ATM fees, or mandated low-interest credit cards. But then, is it about cranking people up, or wanting to help and make a difference?

Life Does Go On Without Credit Cards

A year or so ago we talked about the drive of credit card companies to hook college and university students on their cards, and to have them broke as soon as possible. It’s their training ground for life, and they pay literally tens of millions of dollars to colleges to be able to buy their marketing lists and sell their products on campus.

But here’s something different and quite surprising: A couple of weeks ago the University of Alberta announced that they were going to be discontinuing taking credit cards for tuition fees. The U of A made the move, according to their statements, to be more fiscally responsible. In other words – to save the huge merchant fees they pay to Visa and MasterCard. Want to take a guess of how much the U of A pays in merchant fees a year? $1.3 million! Now think about all those retailers and what they pay because you know that’s included in the prices they charge.

Their hands aren’t totally clean as they have previously done work with MBNA and have sold their student lists to credit card companies. But I’m prepared to forgive and forget, because this is just great news and Phyllis Clark, the V.P. of Finance is absolutely my hero of the month!

Sure, they did it for selfish reason, but I won’t look a gift horse in the mouth: A major institution in Canada is actually going to stop contributing to having students go broke! THAT is great news. Education should include not contributing to the financial ruin of their students – simple as that.

And a note to the person from the student union whaling, whining and complaining how awful this was, and that most students don’t have any other payment options: Think before talking!

Other payment options include: Debit cards, cash (remember what that is), cheques or money orders. If he was alluding to the fact that students don’t have the money, the comment is even more ridiculous: Think part-time job, think saving BEFORE deciding to enroll for the next year, think budgeting or using student loans for course fees – no, not all students use the money for what it was intended…I know that’s shocking.

If that spokesperson believes huge student credit card debt is a great idea – go get a cash advance off your card. It’s THE best way to go broke but surely your job isn’t to help students get ripped charging stuff at 19% is it?
So congratulations to the U of A, and I hope they become the first of many to set this example in weaning student off credit cards and setting a financially responsible example! Now if they could just take the next step and implement a policy that they will not take money from credit card companies, sell their student lists or help them with promotions on campus…