Are You Solving the Right Problem?

Over many years of working at High Tech companies and with technology issues many times I have run into the interesting issue and many times (usually in hindsight) my team has realized they were solving the wrong problem.  It’s easy to get too close to a problem and to lose perspective on what the real problem you are trying to solve, and it happens more times than you think.

Here are a few problems that I have run into over the years (financially) where someone came up with great solutions but at the end of it, they were solving the wrong problem:

  1. Credit Card interest rate is too high, so find a credit card with a lower interest rate and transfer your balance over to have to have your debt grow slower (i.e. lower interest rate).
  2. Figure out that your overdraft protection interest rate is actually higher than a pay-day loan, so you get those instead.
  3. It is cheaper to get your car financed through the car dealership than it is through your bank, thus saving lots in interest paid.
  4. You have a high debt load of credit cards and such, so you get a consolidation loan, but you don’t destroy your credit cards.

Can you guess what the real problems were in these situations?

In case (1), why not pay off your credit card, or find a way to pay it off, or better still, don’t build up debt on your Credit Card is the real problem. Your solution is better than nothing, but you aren’t really solving the problem, especially if you keep using your credit card.

Seriously, you think that getting a pay-day loan is a better idea for case (2)? Stop over drafting and never get a pay-day loan is a much better solution, don’t you think?

Why not make a large down payment for your case in case (3) or better still pay cash for a used car that you can afford?

As for (4) consolidation loans can save folks financially, but if you don’t change your lifestyle and continue to build up debt, you will keep getting consolidation loans, and create a bigger problem for later.

Solve the right solution, did I miss any other “solving the wrong issue” problems?

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Bank Card Security (the saga continues)

About 4 years ago my wife’s bank card was fraudulently duplicated and used (to withdraw a significant amount of money from a non-branded “white” banking machine), and back then I wrote a post humbly apologizing to TD Bank (aptly named: TD Bank I Apologize)  saying, that while I dislike their service fees and many of their investment systems annoy me, I must say that their response to that fraud was very good.

Yesterday, we saw that the bank security system is getting even better at detecting frauds, but that fraud is also still going on (even with the new chip technologies, which were supposed to stop this happening).

My wife and I were out shopping and as we checked out at Sobeys my wife attempted to pay for our groceries with her TD Bank card, she tried twice and got the message “Transaction Denied“, which was very disconcerting (since this is how things started 4 years ago), so I tried my card and it worked just fine (which meant we could also eat!). We rushed home to check out our on-line banking, but no transactions appeared that suggested any problems (and we were not over drafted, which was my other concern), so my wife decided to call the TD Help line.

The first thing that suggested something was very wrong was when my wife typed in her card number on the phone, the system took her directly to an Operator stating, “You must talk to a representative immediately“.

After a long conversation where my wife was asked about various transactions that had gone on with her card, she was told that her card had been “frozen” because of a suspicious transaction in New York State (where neither my wife nor I have been to in the past little while).  Since no transaction even showed up (so far) on the on-line banking, I am impressed by the alacrity of TD in dealing with this fraud, however, I am now very concerned about my own cards.

As you know I replaced my TD Card because it was cracked (no not stolen, physically damaged) and inadvertently secured things a bit more (since I got a new card with a new number and such), however there was a story last week that in my area of Ottawa there have been hundreds of folks who have had their bank cards cracked and had moneys stolen from their bank accounts, so I believe I may be going and getting a new debit card myself.

Question of the day: Have you had your credit card or bank card defrauded in the past little while?

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Carrying Minimum Balance for Free Banking

I got an interesting comment yesterday to my “bitching” about the jump in service charge on the TD Safety Deposit Box, which got me thinking about another great trick the banks have devised, and that is the offering of “free” services if you carry a minimum balance in your bank account.

The comment almost seems from a TD employee (but that is only my guess), but the comment points out that if I was smart enough I’d just carrying the minimum balance ($5000) and then it would be:

“…  saving all these fees which would be similar to making the money in an investment….”

To me that is a staggeringly interesting leap of faith. By pinning down $5000 a year in an account which has a rate of return of 0.10% annually (that is from the TD web site) this is a great investment, because I have saved $60?

I think the author of the comment is also mistaken, since it isn’t really listed on the web site that the Safety Deposit Box Fee is waived for the Infinity account (it is for the Plan60 account and there was another one listed, which I can’t remember). I stand to be corrected, and I will be going into the bank next week and asking if this fee can be waived for the year (never hurts to ask).

Even more interesting is that I am not actually complaining about the Fee for the Safety Deposit Box (I Safety Deposit Boxes are a good idea if you want to keep your stuff safe remember The Safety Deposit Box: Our Friend ), I was complaining about the price hike, which was astounding. Yes, the fees for losing a key and getting your box drilled are penalties, which are your own fault (much like overdraft fees), but jumping the cost by 42% is a pretty big jump.

So the question I leave you good reader is this: Is leaving a large minimum balance in an account to avoid banking fees, really like investing that money?

 

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TD Safety Deposit Box: Prepare for a Service Price Hike

Did I say hike? I meant hold up. Holy cow, I received a letter informing me that the safety deposit box that I was paying $42 a month a year for (price has been creeping up the past little while), will now jump to $60 a year service charge (a mere 42% service charge jump). Now that is what I call a price jump, I wish I could make my investments jump at that gradual rate.

The service charge jump was not even the best part of the letter, if I am forgetful enough to lose a key previously the cost to replace the key was $4.95 but now it will be $50 (plus HST), now that is an approximate 10.000% increase in that service charge (10 times the current rate). I think only PONZI schemes can make that kind of claim for payback on investments, so as a TD share holder I am very pleased (but as a TD customer I am very disgusted).

If you are really forgetful, and you have to have your box drilled to get opened, the previous fee was $104 now it will be $200, which is less than 100% so I guess it is not as large a jump as the others, but still an impressive jump.

What other industry could get away with this kind of price increase with little or no notice from the Government? Only the banks (in my opinion). This service fee is really only for rich folk who have things to keep safe, or shady folk who have pornographic pictures or ledgers with shady transactions logged in them (if Hollywood is to be believed), so I guess it is not something that lots of folks might notice, and the safety deposit box rental is also tax deductible, but still this is amazing.

I always end up torn in these situations. As a blogger this is astoundingly good fodder to whine about the Banks and their high service charges, but as a customer I am bloody pissed off by it, but on the third hand as a stock holder I am rubbing my hands with glee thinking of the dividends that may come from this.

Anyone else care to comment on this service fee hike? Does anybody care?

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Financial Services You Can Do Yourself


One of the exploding growth industries in North America (aside from the cheque cashing industry) is the Debt Counseling industry. There are many (many) of these service companies out there, that are looking for folks that are in over their head (in terms of their finances). These companies portray themselves as wanting to help us all get back on the straight and narrow, and living within our own means (or at least out of debt).

The advertising on radio, TV, and even on the web is quite slick and very alluring, but what you must ask yourself when dealing with any service company is, what is in it for them? How do these companies make money? Unless this is an organization that is run as a non-profit, out-reach program, they are making money doing something while helping you out too.

I have included a video I found on-line of one of these sites (please read the caveat before hand). If you watch it, you might think these people are out to help me get out of debt, but ask yourself while watching this video:

  • How are these folks making money, and staying in business (and are able to pay for slick advertising like this)?
  • Can’t I do this all myself?

Caveat:inclusion of this video is not an endorsement, nor am I receiving any payment for including this video in my post.

Where might they make money? This is all speculation on my part, but my guess would be:

  • They have a deal with a lot of creditors, where they get a finder’s fee, or the like for getting dead beat debtors to pay off (not very likely).
  • The structured settlement put in place by them, they get a cut on? That seems more likely to me.

If they charge you a fee up front for all of this, I might be more inclined to believe these folks aren’t taking a bite out of you, as part of your debt pay out plan, but even then, maybe they are taking two bites at the same apple?

I am willing to listen to anyone in the industry who can explain where these companies make their money, so if you are part of this industry, drop me a line and I am willing to listen.

For my readers, remember, I think you can do all of this yourself (even calling creditors to create a settlement or pay down plan), so remember that before using these services.

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