Interest rates

Let's not get this thread locked , but I was interested in opinions. Keep your blood pressure under control ;)

disclaimer : I am not intelligent about economics.

#1
I've been looking at interest rates due to the following:
The bank debited my credit card account for $45.00. When I talked to them about it , they said they were raising the interest rate on the card for new clients to 19 % , and if I wanted to keep my 10% rate I had to start paying an annual fee of $45.00
Something about this annoys me. When I signed up for the card MANY years ago it was 10 % - no fee. I thought it was a contract we had ?

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#2

I don't run a debt on any of my cards/accounts but checked out what the interest rate was on my personal line of credit. It is " 2% monthly or $50.00 - whichever is greater." What??!!

If I owed $60.00 I would pay $100.00 interest over a 2 month period.. Whatt????!!!

That means that if I carried a $1000. balance for a year, and only paid the minimum fee. I would be paying $600.00 that year in interest for a $1000.00 loan . That's 600 % interest. What ???!!!

Tell me math is wrong and it is not this bad. :)

The banks will really screw long time customers because they know 95% are too lazy to do anything about it. Time to shop around.
In other news, there's at least one small bank in the oil patch so desperate for customers they're now offering the most qualified homeowners NEGATIVE interest rates on new mortgages.

the annual fee on a low interest credit card is pretty much standard... the line of credit, well that seems steep... are you sure it said greater? mind ya 2% interest is pretty good, im 6.5% on my line of credit...

The amount on the Line of Credit sounds like payment not the interest, you should check it. The 19% is common but you can get no fee cards everywhere.

Bank of Montreal changed our account recently and what I thought was the minimum was suddenly 50% higher and I got a ton of service charges for two months before I caught it. Between that and this other deal with their forming a group with policies in violation of the Human Rights Charter (let's not get that started) I am shopping around.

Bank of Nova Scotia or the local Credit Union look like the best and aren't in the BMO discrimination group. As for the Credit card the Canadian Tire money back card, the Credit Union has a Master Card and BNS Visa with different options. American Express isn't accepted at some places but let's me keep my airmiles.

I have been busy and am not sure that these will be useful but these tabs are open in another window and it might be a start.

Canadian tire refund (they also have Canadian Tire "cash")
https://www.ctfs.com/Products/Credit...ageMasterCard/
Bank of Nova Scotia
http://www.scotiabank.com/ca/en/0,,36,00.html
Credit Union
http://www.choicerewards.ca/cards/co...ards/index.jsp

http://duca.com/myMoney/Listing/Loans/MasterCard


Some of the discussion on Credit cards etc. came up on this thread on saving money.
http://ontariofishingcommunity.com/f...howtopic=77701

That's interesting because it is the Bank of Montreal that sent me the letter.

fishy Steve: that what it says : " 2% monthly or $50.00 - whichever is greater"

mosquito: that is the interest

"The 19% is common but you can get no fee cards everywhere." I know this but we had a deal for 10 % and no annual fee . I didn't realize they could change the terms whenever they wanted. What really bugged me is that they just did it - took out the annual fee. No notice , nothing. I could have not even noticed it.

I will look over the links. Thanks.

What do you get back from the card asides from the lower interest rate if you need it? it doesn't sound like you need that specific card. Maybe find a new card that pays you. I like you don't carry debt on cards. I use PC Mastercard and get free groceries from time to time but I'm thinking of switching to a travel rewards card.

They probably did notify us.....maybe... one line on the back of a statement or bill at some point. Sort of like the small print, if you don't see this and don't scream... (using a childish voice) we are going to screw you. (na na na voice).

If you pay off the credit card each month the airmiles or refund no fee cards seem like the best to me. I use an airmiles card AND American Express airmiles card and using the coupons they send the points add up. Every 95 miles allows you to save $10 so I use the card for almost everything I can and just pay it off as soon as I get the bill.

Sharon,
My take on it. If you don't carry a balance on your credit card switch to a no fee card. You can shop around and see what cards offer things you may find useful. Some offer rewards (air miles, cash back, groceries, CTC money) some give you things like common carrier insurance on travel purchased on the cards, insurance on rental cars and other "perks".

On your Line of Credit I highly doubt that is the interest rate. That looks to me like the minimum monthly payment. If you owe $100 your minimum payment will be $50 not $2 this month and your balance next month will be $50 (roughly...it will be slightly higher...maybe a buck or 2 as some of the $50 payment will go to interest and the rest on your principle.)

FW

Right . I forgot about subtracting the 50 paid. Thanks. I will look into a no fee card.

ya payment makes more sense i.e if your balance was $5000 your minimum payment would be $100 (2% of 5000)

2% monthly is more than 24% annual when compounded, my unsecured LOC is around 6% annual. If you are not using the LOC you could just close it.

Exactly. I've found another card at 16% and no annual fee. Will go with that.

:thumbup: as long as it isn't BMO

Quote:

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Originally Posted by Marker

2% monthly is more than 24% annual when compounded, my unsecured LOC is around 6% annual. If you are not using the LOC you could just close it.

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If it's an "unsecured" LOC....yes,but,if it's secured by your home equity,reduce it to zero and consider using it as a hedge against mortgage theft or fraudulent conversion. Because it's a registered instrument,nobody can convert it at a Land Registry Office without the bank's due diligence. The more checks and balances,the better. Mortgage theft is still a huge problem in Canada.

Sharon, check out TD. Over 65 no monthly fees. No fees on interact either. If you have a credit card and you aren't carrying any debt and pay it off monthly why do you need a line of credit. Money grab from the institutions. My bank told me I don't need it and save myself $50.00 a month. Like others have said, shop around.

Thanks. Looking into that.

Quote:

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Originally Posted by trimmer21

If it's an "unsecured" LOC....yes,but,if it's secured by your home equity,reduce it to zero and consider using it as a hedge against mortgage theft or fraudulent conversion. Because it's a registered instrument,nobody can convert it at a Land Registry Office without the bank's due diligence. The more checks and balances,the better. Mortgage theft is still a huge problem in Canada.

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We got our mortgage split between a traditional mortgage and the Line of Credit, we would pay off a bit against the Line of Credit when we could and each January use the Line of Credit to max a payment against the mortgage part. We were able to reduce the mortgage part faster and reduce the line of credit when we could, saving us thousands.

Quote:

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Originally Posted by Bo D

Sharon, check out TD. Over 65 no monthly fees. No fees on interact either. If you have a credit card and you aren't carrying any debt and pay it off monthly why do you need a line of credit. Money grab from the institutions. My bank told me I don't need it and save myself $50.00 a month. Like others have said, shop around.

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A line of credit from the bank secured against the house costs nothing, costs between 3 and 4% and is there for shortfalls, tax installments, renovations and if necessary paying off an especially large credit card bill etc.

Scotia has several no fee cards and low interest ones (not important I think, just pay it off with LC instead).
http://www.scotiabank.com/ca/en/0,,36,00.html

The Canadian tire ones have Canadian Tire money or cash back and if you pay them off on time (using the bank LC if necessary) the interest rates don't matter.
https://www.ctfs.com/Products/CreditCards/

If you have a line of credit on your house, you pay more for house insurance. We did, look into it.

Waaaaaaay to much :)

Sharon go into your branch and talk to a specialist/advisor. If they are any good they will go over various options with you, crunch numbers with you and then you can make the most informed decision with respect to your money and whats most cost effective for your life.

Different kinds of credit, carry different kinds rates etc.
http://www.bmo.com/home/personal/ban...line-of-credit#

In a nutshell, loosely speaking
Credit cards have the highest rates, because the risk (credit default) to the bank is greatest. As the risk to the bank drops so does the rate you pay.
Unsecured LOC
Car loans
Secured, or home equity (other)
mtg

The reason closed are cheaper than open credit (you can pay down whatever you want) is because financial institutions like to know how much $$ is coming regularly (closed) versus irregular (open) where it can be 0.00 against the principle or the entire amount.

Unsecured LoC and secured are generally Prime plus X. As prime moves so does you rate/minimum.
http://www.bmo.com/home/personal/banking/loans-loc/loc

Marker are you sure 6% is unsecured?
Prime is currently 2.85%
Prime plus 3 would I think be more in line with a secured.

[Marker are you sure 6% is unsecured?
Prime is currently 2.85%
Prime plus 3 would I think be more in line with a secured.[/QUOTE]

Yes. Unsecured means that if I don't pay the loan the bank does not automatically have title to any of my other assets (ie house) which is more risk for the bank than a secured loan against another asset. My mortgage, which is secured on my house is at prime less .75%, my unsecured line of credit is prime plus 3% to make it approx. 6%, my credit card is 10% but I get heavy fees each month. As the loans become more risky the interest rate increases.

Quote:

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Originally Posted by trimmer21

If it's an "unsecured" LOC....yes,but,if it's secured by your home equity,reduce it to zero and consider using it as a hedge against mortgage theft or fraudulent conversion. Because it's a registered instrument,nobody can convert it at a Land Registry Office without the bank's due diligence. The more checks and balances,the better. Mortgage theft is still a huge problem in Canada.

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This is good advice, especially considering the recent news reports of mortgage theft which IMO educate the criminals how to do it just as much as it educates the home owner in how to prevent it.

I know what it means, and a whole bunch more it is my business :)(kinda),
But that's why I posed as a question, I don't monitor the spreads day in/day out.

Best advice I can give anyone as both a fully liscenced wealth advisor and more.
If your willing to spend 12, 24, 36, 48, 72hrs..One week or 3weeks
Prices comparing and shopping new cars, trips, boats, guns......dog breeders...
Finding a good real estate agent
Finding a good job.
Finding a good electrician/plumber/roofer

Find a good wealth advisor, its worth the investment of time. They can help you with this stuff.

Quote:

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Originally Posted by JBen

I know what it means, it is my business :)(kinda),
But that's why I posed as a question, I don't monitor the spreads day in/day out

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I may have misinterpreted your question, I negotiated my rates and locked in about 15 yrs ago so the 'spread' may be different now.

You did well :)
And hope my delivery wasn't/isn't off.

Stuff like this (how it pertains) to peoples overall wealth/credit. It's like many threads when people ask for electrical advice, or this that. No "harm", rights/wrongs...Imo take it all in.

And when talking to an advisor--see if what the advisor is saying jives with things read, learned, picked up.
Might help you decide on one.

But at the end of the day, if you needed to re-wire your house, or change a panel........
Doing it yourself?
Picking the first name out of 411?

Quote:

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Originally Posted by JBen

Marker are you sure 6% is unsecured?
Prime is currently 2.85%
Prime plus 3 would I think be more in line with a secured.

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my unsecurd LOC is 6.4%...

As I said, I don't monitor the spreads. Prime +3 is good for unsecureds, I'd have thought it was higher.
Given that they are unsecured, and it is an open loan.
Nowhere near this simple but.
Believe it not, cash flows are important to banks/financial institutions. They need to know how many billions are coming in each day, and how many billions out. By early morning treasury knows if on that day they need to raise funds, or have excess based on all the banks business, and transactions scheduled for that day. Other institutions are lending or borrowing to each other. Normally by 1pm books are closed.

If short on any day, your raising "overnight" funding, if long your long and no financial institution like sitting on money over night. So they are lending it "overnight". Thats why there are penalties for paying off loans early. When you take a loan for X, the bank counts on those monthly payments to be there for whatever term the loan happens to be. When you pay it off it early, those future cash flows/interest payments are gone, and it could cost them money (depending on a million funding variables).

No bank has billions and billions and trillions of cash to "lend"