Canadian Personal Finance Blog

The Finance Minister’s new set of Credit Rules have passed their last hurdle and will be coming into effect slowly over the next little while. Before anyone starts popping champagne corks, this is not a sweeping set of changes (or even a maximum usury charge), but it is a nice start to the issues.

Actual government statement.

Some of the highlights of these changes are:

• An institution may not charge interest on purchases of goods or services made on a credit card during a particular billing cycle if the borrower pays the outstanding balance on the credit card in full on or before the due date.
  • This means that if you do manage to pay off your credit card any month the credit card company cannot keep banging you with interest charges, interest charges must stop, good idea!
• An institution may not increase the credit limit on a borrower’s credit card without first obtaining the borrower’s express consent to do so.
  • So I won’t see on my credit card bill that my credit limit has increased without me asking to have it raised first.
• Many new better rules about how collections can work, which is a good start as well.

I applaud the efforts to start regulating these modern day “Loan Sharks”, but I can’t help but think there is more that can be done, including useful things like rules about when the credit cards MUST refuse credit to someone as well.

I was speaking with a friend and heard an interesting change to the normal story I hear about Credit Cards and Credit Limits.

Up, Up, Up (in a puff of smoke)

Typically Credit Cards raise your credit limits, if you pay your bills of quickly AND you put larger purchases on your cards (and pay them off, as I mentioned). I have noticed this many times, that my credit limit has been “bumped” without me even asking for the raise, I simply get a note from AmexMasterVisaClub Card which says, “Congratulations, you can get yourself into deeper debt now…” (or something like that I am paraphrasing).

What do You  Mean You Want to Lower Your Limit?

I heard a story from a friend who said that as part of one of their MBA courses, they were asked to get their banks to lower their Credit Card limits (good precaution if you have gone from High Flying Single with big income, to poor student again) as an exercise for a course. I believe this was to show just how hard a process this can be, but this may be changing.

Retired? No Credit For You Bub!

A friend who has been retired for about a year now got a note from his Credit Card stating that they had LOWERED his credit limit (without him asking, and without his authorization for that matter). No real explanation was given as to why the credit card company had taken this action, but I would assume they would have figured out that he is retired (just by his age alone, but may see by his credit reports too), and decided it might be prudent for them to lower his limit (in case he goes senile and spends too much money, I guess).

Has anyone else heard of this new type of “imposed belt tightening” by the Banks and Credit Card companies? Very interesting if this is becoming a regular policy (i.e. you are getting old, No Money For you! (to paraphrase the Seinfeldian Soup Nazi)).

Days Off

Hey, I am allowed, I have written far too many days I can remember, and frankly I wonder if some of the posts I wrote thinking , “I must write something today” were worth writing (or worth you reading). I may take more days off in the future, I’ll see how things go.

Unemployment Up Again but only a little to 8.6%

Stats Canada has published it’s monthly employment figures for June 2009 and the numbers are not remarkably different from last month’s numbers, which is a good thing, given the huge leaps we have seen in the past few months.

Employment was little changed in June, leaving total net losses during the last three months at 13,000, much smaller than the 273,000 decline in the first three months of the year. The unemployment rate edged up 0.2 percentage points to 8.6% in June, as more people looked for work.

Youth Unemployment was not good either with this summer upon us:

Youth aged 15 to 24 were hard hit in June, with losses of 33,000. Their unemployment rate went up a full percentage point to 15.9%, the highest rate in 11 years. Employment losses for youth in June were offset by gains among people aged 55 and over.

So the nearly retired crowd seem to be getting  jobs, but students in the summer are not?

Unemployment Up A little More

Around the Financial Whirled

A short sprint around the financial blog world shows a few bloggers on vacation and others enjoying the fruits of their labours as well:

• As mentioned earlier this week iBankCoin Blog is the top Canadian Financial Blogger (by the Globe and Mail at least). His post yesterday about How about a F***ing Stick in Your Eye seems to be standard for his site, so I guess Canadians enjoy a bit of ribald humor and obscenities when it comes to their financial blogs.
• Michael James (my personal choice for top financial blogger) mentions the Liability Loopholes in Credit Card Fraud that you might want to take notice of.
• The Canadian Capitalist asks is Cash For Clunkers Coming to Canada? Is it a wise thing for the government to delve into?
• Larry MacDonald posts the 398th way to save money (the previous 397 had been written in a book by Squawkfox.com ).
• Careful if you are around the Four Pillars as he got a post out of eaves-dropping on a Small Scale Landlord.
• The Canadian Tax Resource wrote about the Top 5 Income Tax Myths , well worth a read.
• I almost had dinner with Riscario Insider this week, but my schedule refused to budge, but he did comment about Popularity Contest: The Best Money Blogs.
• How did Preet from WhereDoesAllMyMoneyGo fair in the Ultimate Expert W Challenge?

Have a great weekend.

Looking at your mid-year personal finance review, you can ask the all important question, “Now what?”, and as usual my mealy mouthed answer is, “That depends!”.

If you have met all of your financial goals for the year and it is mid-year, you set your goals too low (or you sand bagged to make yourself feel good), or you got really lucky. No matter what reason, you can celebrate a little bit for achieving your goals, but now is the time to make some “stretch” goals for the end of the year, and prove that your success at the start of the year was not just a fluke and that you can work hard the whole year. Simply sitting on your financial laurels is just not the thing to do, build from your success and show that you can finish strong for the year.

If none of your goals are met, and you think you will be unable to hit any of your goals this year, maybe it is time to re-vamp, or re-think your plan (or scrap it completely). Not to worry, look at where you had problems with your plan and figure out whether you were:

1. Too aggressive in your planning, and set unattainable goals
2. Very unlucky and the world conspired against your plan
3. You never really planned to follow this plan

If the answer is (3) don’t kid yourself, you need to plan, this is going to hurt you some time soon. If the answer is you were too aggressive then maybe go back to your original goals or plan, and maybe scale them back so that they might be attainable by the end of the year (but still make them challenging).

If things are going OK, and you think you can succeed with your plan, good for you, you have made a good plan, and you are following it. You can celebrate a little in your success, but get back to your plan, enjoy your success and keep up the good work.

Don’t get me wrong, given the amount of complaining from the banking industry, Jim Flaherty’s new credit card rules seem to be a very good start, but I would dearly love to see them go a little farther.  The Globe and Mail does a good outline of what the new rules does address, but my concern is the major problem is still not being addressed, which is the exorbitant interest rates allowed.

Loan Sharks Blush

The rates that Credit Cards charge as regular business while cheaper than seen from the Pay Day Loan world are still completely out of sync with bank rates, yet, they are allowed to inflict this kind of usury on consumers. There are no rules capping the rates that can be charged, and I think that is what is missing from this legislation. I am not sure what the cap should be, but allowing unfettered rate increases is asking for trouble.

Better rules for credit limits would be good as well, stopping folks from being able to bump up their limit via a simple phone call seems a dangerous practice as well. If you want to lower your credit limit you have to send in a signed document and such, but to increase your rate is a simple phone call, wonder why that is?

While I know the other issue with credit card debt is that people are using Credit Cards as short term credit mechanisms (and then turning them into long term credit vehicles, since they can’t extricate themselves from the debt), and that a lot of the financial pits dug by consumers are self-inflicted, I think the Credit Card companies make this trap a little too easy to fall into.

There was one credit card lobbyist complaining about how teenagers and young folks won’t be able to get credit cards if new rules are put in place. I believe I shouted at the TV, “… and that is a BAD thing?”, so my view is less credit cards to less folks might just be a good thing. 

Nobody needs as many credit cards, as we all have!

Other Useful Documents

A useful link for those who are learning about Credit Cards is a document posted by the FCAC called Getting The Most From Your Credit Card. They also have a very good beginners document called Your Rights and Responsibilities , well worth a read as well.