Protect yourself from Identity Thieves!

Andrea told her husband Jack that she had noticed a young person going through their condo paper-recycling bins. At first, she thought they were just looking for recyclables which could be turned into cash, but later realized the person was rummaging through all of the containers that were paper-products only.

These bins often contain bank statements, cancelled cheques, private letters, other important documents, credit card statements and envelopes. If the information is from a business office, old client files and related data can often be found. There have been stories in the news about scavengers going through people’s waste and recyclables specifically looking for these items. The information that can be obtained is very valuable to information thieves and can be potentially damaging to you.

Credit Card Statements – Just how valuable is your credit card number to a thief? One couple was vacationing in Montreal when their credit card information got into the hands of an organized crime group in Mexico. Overnight their card had been maxed out. How would you like your next vacation to start this way?

Bank Statements – With an old bank statement, a cancelled cheque and a little bit of today’s technology, anyone can easily print up cheques drawn on your account and forge your signature. You can imagine the havoc this can create.

Envelopes and Magazines – Check your name and address on the magazines to which you subscribe and the notices you receive and you will often find your account or membership number is displayed. With that number, anyone can gain access to your member or account information and re-direct your mail. In some cases, this can be done on the Internet. If someone can re-direct your mail, would you wonder what else they might be able to accomplish?

Office Waste – The information that can be found in discarded office material is very valuable. It can contain confidential information on your customers, correspondence from companies with which you deal, statements of account, customers’ account data, quotations, billing information, purchase orders, etc. Would you like a competitor to get their hands on any of this information? What about your customer’s own identities – could they be stolen from information you discard?

Andrea and Jack decided to foil the information thieves by buying a personal paper shredder for less than $100. They now shred all papers containing anything other than their names and addresses. Though a determined thief might piece the shredder’s output back together, stirring it up should make this practically impossible.

The Canadian Anti-Fraud Centre (www.antifraudcentre.ca) is an excellent resource regarding all types of fraud including Identity Theft. Here are some quick tips from their website.
1. Before you reveal any personally identifying information, find out how it will be used and if it will be shared, and with whom.
2. Pay attention to your billing cycles. Follow up with creditors if your bills don’t arrive on time.
3. Use passwords on your credit cards, bank and phone accounts. Avoid using easily available information like your mother’s maiden name, your birth date, the last four digits of your SIN or your phone number.
4. Minimize the identification information and number of cards you carry in your wallet or purse.
5. Do not give out personal information on the phone, through the mail or over the internet unless you have initiated the contact or know with whom you are dealing.
6. Keep items with personal information in a safe place. An identity thief will pick through your garbage or recycling bins. Be sure to shred receipts, copies of credit applications, insurance forms, Physicians’ statements and credit offers you get in the mail.
7. Give your SIN only when absolutely necessary. Ask to use other types of identity proof when possible.
8. Don’t carry your SIN card; leave it in a secure place.

In my next post, I will share some thoughts on other types of fraud and identity theft – including the internet, your telephone and RFID scanners!

From loyalty programs to the true cost of credit cards

Moving past the cost of loyalty programs to credit cards

My last blog covered how the costs of all the loyalty programs are passed along to all consumers – even those who don’t belong to such programs. Credit card costs have been in the news a great deal in 2013 and even received a mention in the Speech from the Throne that opened the new Session of Parliament.

Most readers will remember the Competition Bureau finding earlier this year in FAVOUR of credit card fees being passed along to all consumers rather than just those who use the cards. The issuers of the credit cards were, of course, ecstatic with the ruling – merchants not so much and consumers not at all, but then, cynic that I am, did anyone really expect the Bureau to side with consumers over large financial institutions – both national and international in scope?

So let’s do some math (sorry). For simplicity, I will use a card issued in three flavours – a basic, no-fee, no-reward format (Bronze), a fee-based card that also provides extra loyalty bonuses in the form of “points” redeemable for merchandise gifts from the issuer’s pre-selected catalogue (Silver) and the third is a Gold card (also fee-based but at nearly twice the level of the Silver card) that gives points that can be redeemed for travel – allegedly unlimited travel without blackouts and restrictions.

Having operated business that accepted credit cards, I know all too well the costs involved. First the merchant pays a fee to be able to accept each type of credit card. Then they have to rent at least one of those ubiquitous terminals that work at least some of the time. Their banking institution will sometimes charge an additional processing fee to handle the credit card vouchers while other card issuers have a fixed-fee arrangement (as a percentage of the TOTAL amount charged, including tips and taxes!).

A typical fee schedule for this hypothetical card series would look like this:

Card User Charge Merchant Charge
Bronze $0 annual fee 1.75% of total amount charged
Silver $120.00 annual fee 3.15% of total amount charged
Gold $225.00 annual fee 4.65% of total amount charged

I am NOT quoting fees for ANY specific credit card currently in use. These are illustrative only and roughly represent a mid-point of charges currently at work in our economy. Each card issuer and supporting financial institutions are completely free to set (and change) their own fee schedules.

With these fees charged to the merchants and vendors on the total amount put on the purchaser’s card, it is no wonder that the card companies and issuing institutions are raking in obscene profits at the expense of both the merchant and consumers – regardless of their incomes.

If you were a merchant, how much of these merchant costs would you include? 1.75%? 3.15%? 4.65%? Plus somewhere the cost of “buying into” the use of the card and terminal rental has to be included – the merchant can’t afford to take any loss with margins being so tight!

Most users today have either a Silver- or Gold-type credit card so the merchant has to plan for at least the Silver fee and a large percentage of the Gold fee – say 4.15%? On everything. Whether the purchaser pays in cash, uses a debit card (there are fees for these cards too but are usually less than .60% depending on merchant volume) or a credit card. Oh, the merchant also pays GST and possibly PST on top of these fees!

The low and modest income person or family who can’t qualify for any credit card, well, they are all still is paying the fees. Is this fair? This says nothing of the usury interest rates of sometimes more than 24% being charged on any outstanding balances.

Make sure you understand the costs and how they affect you!

Credit card fees – revisted

I think it is reasonable to assume that most Canadians are now aware that the Competition Tribunal tossed a complaint about the excessive fees being charged by credit card issuers (mainly our big banks) and the impact of those fees on small business and consumers. Even more interesting is the fact that the reasons for the decision to dismiss the complaint are being withheld from the public! I wonder what the Tribunal is trying to hide? Is that “independent” Tribunal really in place to protect consumers and small businesses or rather large financial institutions?

As I commented in earlier blogs, nothing in life is free – including the use of credit and the accumulation of “rewards points” or other forms of loyalty incentives. Everything has a cost, and despite what some governments and tribunals claim to the contrary, there is only one payor of these fees and that is you and I – the ultimate consumer of everything produced in our economy.

Somehow, these large institutions (that make somewhere between 5 and 7 BILLION $ per year from Canadians paying these fees) managed to convince the Tribunal that this was in the “best interest” of Canada and Canadian consumers! It must have been very creative and ultimately persuasive and maybe that is why the Tribunal doesn’t want to release all documentation to us. Good heavens, we might even be able to draw our own conclusions that we are being ripped-off and no-one is prepared to take a stand.

I am not a fan of government intervention, but the voluntary code introduced some months back by the Federal Government, hasn’t done anything and maybe the code should become law.

Getting Rid of Debt Faster

Debt unfortunately is a fact of life for a lot of people. Mortgages, lines of credit, student loans, vehicle loans, and credit cards are a part of normal everyday life. The good news is that we can get out of debt and it isn’t as hard as you might think. By making a few minor adjustments in how we pay our debts we can save ourselves time, grief, and a lot of money.

The first step is to lay out all your debt on one simple sheet of paper (or on a spreadsheet if you prefer to use the computer). Who do you owe money to, how much is the total debt, what is your interest rate, what are your minimum payments, and what are you actually paying?

The second step is to order your debts from highest interest rate debt down to lowest interest rate debt. If you have a department store card this is most likely your highest rate debt. For example The Bay and Sears credit cards have 29.9% interest rates, while a lot of your “Don’t Pay a Cent Event” loans can cost you 35% interest.

The third step is to stop using your credit cards and other debt instruments. If you have regular payments coming off your credit cards, move all the payments to one card, preferably one that gives you cash back, AirMiles, reward miles, or some other perks, and make sure you are paying for those payments on top of your minimum balance payment.

The fourth step is to reduce all of your payments on every single debt except the highest interest rate to minimum payment. Take all of your ‘extra’ payments and put them on your highest interest rate debt. Keep all your extra money going onto this debt until it is fully paid off. Then CANCEL in writing (with carbon copies going to both credit bureaus) the card or loan.

The fifth step has you moving all of your now freed up cash to the next highest interest rate debt until it is gone. Then repeat until you are debt free.

If you have access to a line of credit with a better interest rate than your credit cards or other debts you can use that to pay off your more expensive debt and then move all of your payments onto your line of credit.

Becoming debt free is not complicated. By following a simple plan with a bit of discipline you can get free in way less time than you thought possible. And being able to live without the burden of owing money is a wonderful thing.

“Home life ceases to be free and beautiful as soon as it is founded on borrowing and debt.”
Henrik Ibsen

The costs of imposing a legal “fidcuiary duty” on the Canadian financial community

Presuming that reasonable people understand the need for a legally-grounded requirement for advisors – ANYONE who advices, sells, recommends, etc. any financial product or service – to have a fiduciary duty or responsibility, the next question is “WHO IS GOING TO PAY FOR IT?”

I can already hear pundits and armchair quarterbacks and experts pontificating that the industries should cover the cost of this new responsibility – and YES, there is always a cost to regulation – ALWAYS. So let us examine the cost issue a bit further. I have no way of quantifying, at this early stage, the cumulative financial impact of this additional layer of regulation, but it will add costs. For every regulation, someone has to supervise it, train advisors and employees, file reports, etc. PLUS, let’s not forget some amount of government supervision that will require more bureaucrats, auditors, examiners, investigators and support staff along with all of their associated staff and benefits costs.

The easy (and palatable) target is the financial services industry themselves – ALL of it. It is easy, politicians and regulators can say “we aren’t going to raise taxes for this, we will make all of the players pay”.

Unfortunately, this is utter nonsense of course – the only payor is the consumer – the user of the products and services is always the payor. Businesses are not going to reduce their profit expectations to their shareholders due to more regulation and the costs associated thereto. Those costs are going to be reflected in what those businesses charge for their products or services. Whether it is insurance premiums, MERs, fixed costs, reduced benefits, higher rates on loans, administration fees or something else, we, the consumers will pay for this new duty.

Please, don’t jump on me thinking I am using this as an excuse to try and stop this move – I am not – I firmly believe that EVERYONE who advises consumers about ANYTHING to do with their money, investments, financial affairs, credit, loans, mortgages, payday loans, real estate agents, general insurance agents, life insurance advisors, bank tellers, etc. SHOULD have a legally-mandated fiduciary duty and responsibility – I just don’t want people to think they are getting something for free! Remember TANSTAAFL (see a previous blog from 2012)

So the issue now is what is the limit that consumers are willing to pay for this added “protection”? How much is it worth to each of us

2012 Taxes – some quick reminders

With mid-December upon us, I wanted to just do some quick reminders for year-end!

a) Don’t go into debt on credit cards just because it is Christmas!
b) Tax Free Savings Accounts (TFSAs) – to use your 2012 allowable limit, you must contribute BEFORE December 31st, 2012. There is no 60-day grace period as there is with RRSPs and Spousal RRSPs. The TFSA limit increases for 2013 to $5,500.
c) Registered Educations Savings Plans (RESPs) – similar to TFSAs, there is no 60-day grace period to get your contribution into the plan for 2012 purposes and obtain the maximum Canada Education Savings Grant (CESG).
d) If you need to maximise your 2012 Medical Expense Claim, and need prescriptions refilled, glasses or contact lenses ordered or maybe hearing aids purchased – do them now before December 31st, 2012 or you won’t be able to use them for your 2012 tax return claim. Also consider any needed dental work.
e) Charitable donations also run on a calendar-year basis so mail those cheques now or do it on-line. Remember, once you have donated $200. in a tax year, the Federal Tax Credit on all donations in excess of $200. increase from 15% to 29%!
f) For those of us who are self-employed and are considering when to purchase software upgrades, software updates (for programs that are income-tax sensitive) or new hardware, consider purchasing them now – some very good deals are available and thy should count toward 2012 allowance business expense deductions. The same applies to car servicing or repairs that are due – including switching to your snow tires!
g) For students, pay for your 2013 tuition fees before the end of December and the deduction can be applied to your 2012 tax return – particularly if you have income from a part-time job.

Be happy, be safe and look forard to a happy and successful 2013! Cheers