Guest Post Today
Posted by John Draper | Filed under Debt Traps, Guest Post
A few weeks ago, I read a comment by Alicia that expressed her frustration with her credit card company for the “trick” they were playing on her. So I contacted her and asked her to write a Guest Post about her experiences of late. Here’s what Alicia has to say…
People learn many things from their parents. Mine taught me many great lessons, but sent me to terrible schools for money management classes. So it’s been an uphill battle as I relearn all the “skills” I learned at the financial schools my parents sent me to.
First, they sent me to Ostrich Elementary School where I learned that if I simply ignore my bills (bonus points for extra credit if I threw them out without opening them), I will have to declare bankruptcy and I will get an A+ for making my bills disappear.
Second, they sent me to Junk’R’Us High School where I learned that if I buy junk food for my body and junk for my house (bonus points for extra credit if I could buy things and get one at 50% off even though I couldn’t use the second item), eventually I will become so sick I will have to have doctors and family members take responsibility for my body and house.
Next I sent myself to the Try-to-Figure-it-Out-On-My-Own University, where I relied on myself to make a giant financial hole.
Then I discovered distance education and have become a Gail disciple (and I get bonus points for extra credit for using the magic jars!)
But lo and behold, the creditors keep trying to take away my bonus points for extra credit! These schoolyard bullies are trying to keep me firmly at the bottom of the financial hole I dug during my early twenties (bonus points for extra credit for them if they can get me to keep my husband and son there too).
Last week I received my RBC Visa statement, and the tricksters had written me a lovely little message, asking me to “Take a Break this month”:
“Because you are a valued cardholder, we would like to offer you a … payment holiday by waiving your minimum payment this September. Of course you may make a payment if you wish. Standard monthly interest charges will continue to accrue and the minimum payment on your next monthly statement will be calculated in the usual way.”
Take a break? Really? Sounds too good to be true, so I remembered one of the first lessons I learned from Gail – figure out the total cost of something before you buy it!
If I paid the minimum September payment, my October balance would be $2,155.35. If I took the break, and didn’t make a payment, then my October balance would be $2,203.05.
This means that the “break” would cost me $47.70 dollars on top of my current bill! Ludicrous! Why on earth would I pay RBC Visa $47 so I could skip my September payment – my minimum payment amount for September would be less than that!
This is what really just takes the cake though: I have no idea what my September minimum payment is because it’s not listed anywhere on my bill!
Good thing Gail offers distance classes via her website and “To Debt Till Us Part”! Thanks to her lessons, I know that making minimum payments is a guaranteed way to get failing grades. And I would never, ever risk detention by taking a payment break! For extra credit, I’m going to switch credit card companies to someone with less sneak attacks on my money!
I’m looking forward to graduation day, when I can proudly sign my name:
Alicia, D.F. (debt-free)!
October 16, 2008 at 7:57 am
Bravo Alicia! You are a stellar pupil! I particularly like this post because RBC is the culprit and I’ve held a grudge against them since they overcharged me for insurance when I first moved to Canada
Best wishes!
October 16, 2008 at 8:43 am
Way to go Alicia. You’ve passed classes that I can’t seem to get into. I have a similar problem with MBNA, and infact sat on the phone last night for over an hour with their lovely customer service center. Apparently, if you pay your bill when it comes in, your payment is posted as an extra. You need to wait until after the 28th (but good lord, make sure it’s before the 9th) to have the payment posted against the bill you got. Funny thing is, they can’t change anything over the phone. If you want to protect your credit, you need to make another payment (before the 9th).
I never seem to understand this stuff. You’re my new hero Alicia…maybe we should set up a study group
October 16, 2008 at 8:50 am
I love the idea of a study group-good call Corrie! Props to Alicia for educating herself and not falling for a “trick question” on a “pop quiz”!
October 16, 2008 at 9:28 am
Great post!! I hadn’t noticed this before, but CIBC Visa also does the same thing! Every other month since at least March 2007 (I’ve discarded the earlier statements), we’ve been offered the ‘flexibility’ of not paying our minimum payment. Despite having a balance, there is $0 written in the minimum payment section. We’ve always paid our entire balance each month so I’ve never really looked at the minimum payment amount.
Another issue I find amusing is when Visa increased my husband’s credit limit after a couple months of higher than normal monthly balances. Accompanying the credit increase letter were these credit card cheques. The documentation was titled, ‘There is never a better time to use your credit limit increase’. They tried to convince us to use these cheques to pay our mortgage payment with our credit card! Wow!
October 16, 2008 at 9:29 am
Is that true Gail??? I pay my credit card bills the first of the month every month, and have been for over a year now…hopefully only another 6 months or less and I’ll be done with balances forever. But now I’m concerned that they think I’m making an ‘extra’ payment and not my actual payment! I checked my credit rating a year ago and it was fantastic (cause I was a good person to lend to since I’d spend, spend, spend I guess). Should I check to see if I’ve screwed it up now because I make more than my minimum payments but on the first of the month?? Gah!
October 16, 2008 at 10:10 am
my husband gets those ‘don’t pay if you don’t want to’ notices on his credit card. however, i have never gotten one.
i’ve never fallen for it, and i’m glad you haven’t either!
i can’t wait until i can sign my name d.f. as well.
October 16, 2008 at 10:30 am
Awesome post Alicia… I see someone already mentioned the CIBC card doing the same thing. I used them for years and switched when they started sending me statements like that…sneaky way of trying to look like they are doing you a favour… as if! …but all the credit card companies are really the same. I can happily say I owe $0. on any credit card. All that’s left is 6 more months to pay off my line of credit and I am debt free too!! (except for my mortgage)
Ahhh the joy of not owing a penny on credit… I can’t wait!
When I finally paid off the credit card last year I literally felt a huge weight come off my shoulders… I have been in some kind of debt since my first credit card at 18years old! Never never again!
October 16, 2008 at 10:30 am
I’ve also received a “payment holiday” on my MBNA account. Wouldn’t it be nice to have an “interest holiday” instead?
October 16, 2008 at 10:41 am
Great Post Alicia, I’ve only seen the “Skip a Month” once and funny enough it was from RBC, now that card is my emergancy card and has not seen the light of day from my wallet in years. The PC card is now my card of choice.
October 16, 2008 at 12:28 pm
the sad truth is that you can switch in protest if you want, but every single company is doing it. your next bank will do, and so will the next. there are no few ‘innovative’ companies that we could be safe with. not to be all doomsday-ee but the truth is we have to take it upon ourselves to do our research and protect ourselves.
the bank is a corporation that feeds itself, and no one else. only people care about people (and often times, not even that).
keep an eye out and be smart and you’ll be fine, no matter what they throw at you!
October 16, 2008 at 1:05 pm
Nice post Alicia – and as Kristin says, all the banks are doing it. I started noticing these “payment holidays” each year after Christmas. The banks way of “easing the debtload of Christmas”. (I know better now) Presently I receive these notices with my BMO Mastercard and frequently with Capital One (now that I usually do not carry a balance). Oh yes – and Capital One thinks they are giving me some kind of bonus when every 3 or 4 months they send me cheques to use to cover my day-to-day expenses. Aren’t these so-called innocent cheques lumped together with cash advances rather than purchases, and usually at a higher interest rate?? Insane!!
October 16, 2008 at 1:18 pm
Alicia i’m so proud of you! That was a wickedly funny post, and you know i agree – your dad and i didn’t know a thing about budgeting and didn’t pass on any skills except bad ones. I’m thankful that i’ve learned a bit more in the past few years and so far have avoided bankruptcy
.
This is a good example of what changing your way of thinking can do. If you decided to just ‘blame the parents’ instead of taking responsibility yourself, you’d never have learned the skills needed either. And you wouldn’t be able to pass them on, which breaks the cycle!
Ha! Bring it on Crazy Credit Card Companys! you can’t fool my daughter!
Thank you Gayle. Your show and your work really do make a difference to people’s lives
October 16, 2008 at 2:07 pm
My favourite is when they call to say you can pay a lower introductory rate if you transfer balances from other credit!
“Whats the fee?” I ask.
That’s when they splutter and backtrack.
In my experience, there is ALWAYS a fee. It’s not just the interest $$ from you that they are looking for! They don’t do the transfer from your higher rate card for free, it’s at least 3% right off the top for the transfer (so if it’s a $5000 balance you are transfering to get the lower rate, then you are adding at least $150 straight away). And I know it has been mentioned before, but the payback for it is really interesting. If you use the card after the transfer, the low interest rate doesn’t necessarily apply to the new charges, and GUESS WHAT? Those higher interest applicable charges are the LAST ones to get paid (so they can charge WAY more by the time you are all caught up). I am sure there are situations when paying the fee may be worth it, but be careful NOT to use the card until the balance is zero for at least a month…
And then there are the “convenience cheques”! Oh ya, those are great eh?
October 16, 2008 at 2:26 pm
Great post Alecia!! I had a similar financial education but have studied hard to imporve our financial lot in life.
You issue with the CC company is so timely as yesterday my BMO Mastercard statement arrived and they had charged me interest!!! We pay our credit cards off every month, on time. Well, apparently I missed paying $20.00 of a sizeable balance and they were charging me the interest for the entire balance carried during the month- a sizable chunk of cash!!! As we have always paid the balance, I have never run into this before. They gave me a “grace” this month and removed the charge but warned me that next time they wouldn’t be able to.
Then she asked me for my cell phone number. I told her “yes, I know we are an anomaly, we don’t own cell phones and we pay our credit card balance on time, every month.” She thought that was hilarious!!
It is a cut throat industry – buyer beware!!!!!
October 16, 2008 at 2:54 pm
Once Citibank did the right thing, they sent me a cc application that charged 0% for the first year so I transfered my $10,000 car loan to the card, we worked hard at paying it off in 11 months and didn’t charge anything else to the cc, we didn’t pay a cent in interest it was all on them. Funny I don’t hear back from Citibank anymore.
October 16, 2008 at 5:36 pm
Haha! BMO does the same thing to me more than a few times. Now, the bank has even lower the interest rate without me asking! Now my credit card has an interest rate of 9.9%. Thanks! That would mean that I would not be applying for new credit cards in the near future. I pay my balance off every month anyway, but it’s nice to know that I’m a “preferred customer”. Haha!
October 16, 2008 at 9:38 pm
I don’t think it’s RBC doing this; it’s Visa. I live over the other side of the world from Canada and had the same offer with my bank’s co-branded Visa. Becoming more Gail-wise, I ignored it. If I hadn’t, my plan to clear my CC debt by October 30 would not be happening. Like Alicia I will be happy to sign my name Ajana D.F. and I know that will be on August 30 2009. I hope the folks here will raise a virtual glass for me on that day; I’ll be happy to return the favour!
October 16, 2008 at 10:19 pm
One payment before I paid my card off, they extended the limit by $700 with the comment “We hope you enjoy your new spending power” or something of the like. My reaction was just “HAHAHAHAHAHA…no”.
People seem to keep going on about RBC visa. Makes me glad I don’t have one. They keep offering, but I’ve learned my lesson with credit cards and just managed to pull my grade up to an “A”.
Just out of curiosity, is there a spot on this site where people can share that they’ve made it back to black? That way we can salute those who get to sign their names “Debt Free”.
October 17, 2008 at 5:07 am
No Cat, but that’s a really really good idea. g
October 17, 2008 at 9:08 am
Great Idea; I look forward to signing mine… in or about the year 2032. Sigh.
October 17, 2008 at 9:51 am
Don’t you love credit card companies? After watching Gails show I sat down in front of my $10,000 visa bill and said enough is enough. I’m fortunate enough to have my condo mostly paid off so I borrowed 10gs from my line of credit ( which is less than half of what my interest is on my visa ) and I paid it off entirely . Not being satisfied I called up Visa and spoke with a lovely ( note the sarcasm ) woman on the other end of the line who tried in vain to keep me from lowering my credit limit to $ 2,000.
She did everything in her power from telling me that if I lowered it I wouldn’t get the higher limit back to ” it wouldn’t be a good idea because it would affect my actual credit rating ! ” can you believe it??? SO GAIL !! thank you! Im now in control of my debt… and a word to everyone out there… DEBT isn’t ok….. we have become accustomed to believing that buying things we can’t afford is ok… funny we don’t remember that most of our parents didn’t have credit cards.. they only really came into existence for the majority of the population in the late 70’s early 80’s.
Now when I go out shopping I ask myself this question before I buy something… ” Do I really need this item… ” If the answer is no… then I don’t buy it… the other question I ask myself if I really do need the item is … ” Can I afford to buy this item…” or ” If I was to pay cash for this item… would I buy it? ”
Thanks Gail you rock !
John Toronto
October 17, 2008 at 12:01 pm
Angela – you have an interest rate of 9.9% with BMO? I have always been told by BMO that I can’t get lower than my 11.4%. It would be nice if there was somewhere on this site that we could share info re: fee’s and interest rates. I’ve always said – knowledge is power.
October 17, 2008 at 1:25 pm
Just keep at it Geoff – you’ll get there!
I was so happy the day we became debt free… and then we purchased a house a few months later. So much for debt free….!
October 17, 2008 at 10:32 pm
@ Dianna – Yeah, my BMO Mastercard has an interest rate of 9.9% and I don’t have to pay an annual fee for that. However, I have been BMO’s customer since my university days so it has been at least 7 or 8 years. I think I’d made my payment late a few times but that occured during the first year or two I had the card. Also, I always pay off the balance completely.
So, a few months ago, BMO sent me a letter letting me know that I’m one of its “preferred clients”. The bank likes me so much that it would lower my interest rate from 18.50% to 9.9%.
And now until the end of December, BMO even let me to get cash advance from the Mastercard with 3.99% interest rate.
So, that’s how BMO wants me to spend money!
I’ve told a couple people about my BMO Mastercard and none of them have ever heard a bank would lower someone’s interest rate without the client asking. So, Dianna, I don’t know if you could actually apply for a 9.9% interest rate card with BMO. It seems to me that BMO offers this interest rate to a selected group of clients only.
October 18, 2008 at 9:07 am
May I share some thoughts as one who went through the mill, and got off the credit treadmill, after a relationship ended, and my years of running on credit ( more like running on empty) finally caught up with me.
I had to go through a “consumer proposal” several years ago (orderly payment of reduced amounts to creditors), through the court. Both the worst and best thing that ever happened to me. The worst as I was depressed, physically sick and humiliated doing it. The best as I changed my life’s spending pattern almost overnight-and had to with no credit! I installed Microsoft Money on my computer to help me create a budget and track all my expenses and income to that budget. Still use that MS Money prgram faithfully now.
For years I was always close to the limit on various cards and or a credit line.Even though I never actually missed a payment. Just borrowed from Peter to pay for Paul etc. When I started to withdraw from my RRSP just to meet day to day expenses -I OWED big money on a RRSP loan too- I knew I was in BIG trouble, and got help through a bankruptcy office for the Consumer Proposal.
Not a bankruptcy, but one step away. It probably cost me more than a bankruptcy, but I also could pay off a Proposal with a steady job. I also got to hang my head just little bit higher by paying it off, over several years, and paying more of a percentage to my creditors for what I owed than they would have got from a bankruptcy.
I actually was offered and got a regular (not pre-paid) Capital One credit card during the Proposal payment period – a $500 limit!- that several years later has been increased to $3000. I’ve never spent a DIME on credit charges since I filed for the Proposal and I got back into a modest savings program almost right away. As mentioned, I had some RRSPs before but lost them when I had the Proposal. Yes my small savings account got used up to pay for unexpected things but I started again. Stopping smoking saved me a lot of bucks as well as hopefully my health.
I did later get married- two incomes- and recently got a small inheritance, so I realize my total economic picture changed faster than most. But my focus changed before that.
Once you get yourself to realize that a credit card is a convenience, not for borrowing, what a difference to the mind set about money. (I realize an emergency like a dental crown might be an exception if you don’t have enough savings to pay it all off at once. But that only works anyway if you have room on your credit balance to pay the dentist!
Even though I now have money in the bank, I’m STILL anal now about paying off a credit charge right away, before the bill comes in! Like using the card to pay for a dinner, then paying it to my credit card electronically from my bank account as early as that night, but usually in ady or two. Another option would be to open a separate 3 percent savings account at my Credit Union, then transfer to it amounts to cover current credit card charges. Then pay off the credit card bill from my savings account when the bill comes. But I much prefer to keep paying down the card as I go- thinking it as one step away from cash, not a bill coming in later. Too many years worrying how to pay that bill coming later.
Hang in there. From one who has been there it is possible. I hope you don’t need to go through a Consumer Proposal or bankruptcy to get to the end of the tunnel.
Bless you Gail for your good work and this forum.
January 22, 2009 at 9:41 pm
D… thank you for your story. I’m going through the early phases of a consumer proposal right now, and I’m just so overwhelmed by it all and feeling very alone. Reading the eventual positive outcome of this very drastic step has reduced my stress level significantly. Thank you for taking the time to share your experience in such detail, and thank you Gail for providing this forum for information sharing. All the best, Jane
August 18, 2009 at 9:31 pm
Koodos to anyone who recognizes they need to get a grip on realty before they dig themselves to oblivion in debt. My dad past just after my 8th birthday. Mom always said I was like a shadow to him. She worked very hard to keep us afloat, I was the youngest of 4 left at home the other five already busy with families of their own. Dad never believed in buying anything on credit and Mom never feared hard work. Two traits I believe I inherited.
I have become an avid fan of “Til debt do us part” and often shake my head at how some of the people depicted appear clueless though not hopeless thanks to you Gail. I went so far this week as to threaten a co-worker with a “Gail Intervention”.
I often wonder if I missed my calling in life by studying computer programming and never really applying the skill by actually spending the last 26 years working as a bookkeeper. My husband and I are not debt free but have a serious grip on it. We always discuss things and never create a debt without lighting a lantern at the end of the tunnel before we dig ourselves in.
Gail – do you have any comments ? Is it nothing but a pipe dream to attempt at this late stage to develop a second source of income and assist people with financial issues? I would love to work with students before they get into bad financial habits. Is there any on-line or distance training available that you can recommend.
I myself started using GIC’s, RSPS etc. since the day I first was gainfully employed. That was when the Freedom 55 plans came out. Every chance I get I tease my financial advisor about how close the 55 is and could it possibly be sooner like Freedom 50. I don’t plan on sitting out my retirement years. Only a Lottery win can get me off the proverbial treadmill overnight !