Everyone knows there’s a right way and a wrong way to use credit cards. Used right, credit cards are convenient and rewarding. Used incorrectly, they can hurt you faster than viper’s venom.
Credit card issuers have deliberately created tricks, traps and gotchas hidden behind mounds of small font disclosures, making their practices entirely unintelligible, but completely legal.
To help us expose some of the lesser known, but more dangerous, Canadian credit card practices, we enlisted the help of Canada’s maven of consumer protection, none other than Ellen Roseman, personal finance columnist for the Toronto Star. Here are 8 lesser known credit card dangers she wants Canadians to know about.
Broadly Defined Cash Advances
“A lot of transactions are now classified as a cash advance that you wouldn’t expect, like lottery tickets, gaming, and taxes. You get no interest free period, which people find quite surprising. Watch out for those very carefully.”
Hard To Pay Due Dates
“People think I’m just going to pay my credit card bill on the due date. But if it’s a Sunday or holiday Monday, the payment gets applied to the weekday afterward and then you have a late fee for the entire month. Pay a couple of days ahead of the deadline. I don’t wait until the end of the cycle.”
Foreign Transaction Fees – Times Two
“If you have made a purchase in U.S. dollars and then you return the item, you often find you are out of pocket because the rate when you buy (made your purchase) is different than the rate when you sell (made your return) because of currency fluctuations and also because of the way banks calculate rates. So the return has cost you money even though you don’t have the merchandise anymore.”
“Originally it was only Sears that was charging a fee if you had an inactive account with a balance. And then they all started uniformly across the board. So you buy something and return it, and there’s a credit in your account, you better use it within a year because they’re going to charge you a fee on it! If you do get charged those fees, call and say you didn’t know and maybe they’ll remove them.”
(Non)-Balance Protection Insurance Fees
“At the beginning the tagline was always you don’t pay for balance protection insurance unless you carry a balance every month. Now at least half of Canadian credit card issuers changed it so that you’re paying every month based on your average daily balance. It doesn’t matter whether you’re paying your balance in full or not, you’re still being charged a balance insurance fee every single month.
It’s a terrible product. CBC marketplace did a show about it and they found that several of the staffers had it on their credit cards and they didn’t even understand what the fee was. It’s kind of mysterious on the statement. Then they had 2 people try to get a refund of their premiums. One did and got $3,500 back!”
One Card, Multiple Rates
“Only use your balance transfer card for balance transfers. Don’t put any purchases at all through your balance transfer card. The interest rate on purchases is usually in the 20% range. Many people don’t realize that. Put your balance transfer card in the back of your wallet, or better still, keep it out of your wallet.”
Points Expiry – A Real World Vanishing Act
“The other thing that really bugs me is the expiry dates and forfeiture of points with Aeroplan and Air Miles. What they actually show is total disloyalty toward the customer.
Air Miles is the one that really bugs me now. 5 years ago they said that after 5 years they would cancel all the points that were 5 years old. The first set of Air Miles points is going to become inactive at the end of December, 2016. The company itself has not notified its members. You cannot rely on them to inform you and they use every devious method possible not to inform you.”
Aeroplan’s Inheritance Tax
“People also get caught with Aeroplan when their spouse dies and had Aeroplan points. You have to buy back your spouse’s points, which is horribly expensive. The only way to get around that is to know your spouse’s password and be able to get into their account and use the points without telling Aeroplan your spouse has died. It’s a cash grab.”
How To Fix What’s Broke
“In my experience whenever you have a problem with a credit card and you’ve never had this problem before, if you call your issuer and talk about how long you’ve had your credit card and emphasize your loyalty, and say you didn’t understand and would appreciate if you take the fee off your bill, they will do that for the first time. Sometimes even the second time.
Much of this good will implies that you are up to date with your credit card payments. As long as you’re never late they’ll consider you a customer in good standing and often be helpful if you call them.”