Corpcentre's Blog

April 9, 2010

January 17, 2010

$170 Billion Charged to Visa and MasterCard

Once upon a time, there was the Chargex card. Some received it from their bank but most Canadians lived without it. Today, more than 40 years after Canada’s first charge card, there are more than 74 million credit cards in circulation, roughly 3.1 cards for every Canadian over age 18. The last available statistics indicate that Canadians charge more than $170 billion to Visa and MasterCard.

Studies show that the average person spends 112 percent more on a credit card as opposed to cash payments. In real terms, this means that Canadians are living well beyond their means. Many are juggling several credit cards and paying minimum monthly payments as low as 2 per cent of the balance, rather than paying the entire balance. In fact, more than 50 per cent of credit card holders opt for not paying the balance. Putting this into perspective, if your balance was $5,000 at 18 per cent interest, and you opt to pay only the minimum monthly, it would take almost 30 years to pay the balance, assuming you did not add to it.

Part of the problem is that credit cards are a basic necessity of today’s society. Some cards also provide benefits that can be quite worthwhile. The trick is to be in control.

There is no reason to carry a different credit card for each store and each bank. One all-purpose card should suffice for virtually every need. (It is wise, though, to have separate cards for personal and business expenses). Check the interest rates as they vary greatly from card to card. Avoid temptation! Use the card for what you need, not what you want! Using a credit card as opposed to not carrying cash makes sense. Using it instead of cash that you don’t have can lead to problems.

If credit card debt starts taking over your existence, don’t be afraid to seek help from a credit counselor before it’s too late.


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January 14, 2010

The End of Low Interest Rates

The period of low interest rates is coming to an end. According to current forecasts, the rates will start rising midway through 2010. For many Canadians who went on holiday shopping sprees, stretching their credit limits to the max, the rise could spell sudden difficulty or disaster.

The Bank of Canada has warned that the biggest risk to the country’s financial system is record household debt. Canadian households spent an average $71,360 last year, two per cent more than 2007. Approximately 20 per cent represented housing expenses.

As many Canadians wish to unload their mortgages as soon as possible, they are struggling to meet payments due to accelerated pay-downs on principal. Combining these high payments with other debts has put a stranglehold on many consumers.

It is crucial to take control of your debts before they control you. Experts suggest developing a plan of action to tackle your debts before problems arise.

It may be wise to suspend accelerated pay-downs on your mortgage. Use the extra cash from the lower mortgage payments to tackle the credit cards and other debts. Refrain from adding debts to your cards while you reduce the balances. Remember that higher unpaid balances carry higher rates of interest. It may also be advisable to take a consolidation loan at a lower rate of interest and pay off the cards. Also, try not to use more than one or two credit cards.

Sometimes, debts can get the best of us. Don’t be afraid to seek help from credit counselors, if you feel that you are beginning to drown in debt. These professionals can help you before you panic and assist you in gaining control of your financial situation.
 
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January 13, 2010

Good Debt Versus Bad Debt

How many of us have been to our physician and received an explanation about good cholesterol and bad cholesterol? Much has been written about it, as well. But, how many have heard explanations about good debt versus bad debt? Probably very few, as financial education is sorely lacking in society.

Personal debt is on the rise, partly because obtaining credit today is relatively easy. If you breathe, you can probably obtain a credit card from your bank or a retail store. And, more often than not, the only one who benefits is the one who issues the card and charges interest rates that can exceed 20 percent.

Far too many consumers confuse credit cards and cash. If you are prepared to pay off your monthly balance and merely use the card for convenience, you’re in the responsible minority. However, far too many people freely use their credit cards and neglect the fact that the bill eventually has to be paid. Paying only a minimum at the end of the month only digs a deeper hole. And, truthfully, most people don’t keep track of how much they spend on their cards.

On the other hand, not all debt is bad. Taking a mortgage to purchase a home is a wise investment. As the house appreciates, the value will exceed what you paid on the loan. Another example of good debt is securing a loan to purchase high return stocks or bonds. When the return exceeds the interest paid, your debt has accrued value.

Experts suggest that your debt-to-income ratio should not exceed 20 per cent. Higher than that looks bad on credit reports and can lead to difficulties. Better to keep debt to a manageable level and avoid the temptations of living on credit. Even when times are good, don’t forget to prepare for the eventual rainy day as well.

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December 1, 2009

Credit Card Code of Conduct

If you own a retail business, you will understand exactly what the issue at hand is all about. How much of your hard-earned money goes to the credit card companies through fees and charges that seem to keep rising?
 
Canadian Finance Minister Jim Flaherty recently announced the implementation of a voluntary code of conduct for the credit card industry. The new Code of Conduct has come in response to increasing complaints by small businesses about the excessive fees that they are being forced to pay.
 
The voluntary Code of Conduct, which may be revised over the next couple of months according to Mr. Flaherty, lists measures to give merchants freedom of choice in regards to which payment vehicle to use. The Code requires posting of online information regarding the interchange fees charged to retailers. It will also require the credit card companies to give retailers 90 days notice of any fee changes.
 
Responding to the announcement of this new Code, retailers view this as a positive development but would also like Ottawa to create an oversight body to ensure adherence. Creation of a parliamentary committee was one possible suggestion.
 
Mr. Flaherty pointed out that this Code of Conduct is voluntary and he hopes that the credit card companies will respond positively by voluntarily adopting the measures set out for the industry. The alternative, according to the Finance Minister, is to regulate the industry through legislation. But, as the credit card industry has objected vehemently to regulatory legislation, it is hoped that they will adopt the voluntary measures.
 
As other voluntary codes of conduct have been adopted by other industries, retailers hope that the credit card giants will similarly adopt these new guidelines.

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September 13, 2009

Leaving Your Purchases at the Checkout

Let’s be honest; most of us have done it. Embarrassing as it might be, most people have removed an item from their shopping cart while waiting in line at the checkout. It used to be merely changing your mind, or realizing you took the wrong item off the shelf. Today, it is a totally different phenomenon. In today’s rocky recession climate, people are tightening their belts. Some are doing it out of necessity while others are adopting a more cautious attitude. Whatever the reason, more people these days are careful of what they purchase. They come to the store with a list of needs, not wants, accompanied by a specific budget. If the tally should move above their available funds, something comes out of the cart.

As yet, there are no hard statistics for this latest trend. However, more and more stores are reporting a growing number of un-purchased items at the cash register, either removed by shoppers as they wait in line or removed by the cashier at the shopper’s request upon seeing their balance.

Shoppers have also begun arranging their purchases. Health care and other basic necessities are the first to go through. If there is enough money in the wallet, the frivolous items go through last.

It’s not just a question of cash. Credit card purchases have also been affected. Credit card companies used to allow customers to exceed their credit limits by up to 10 percent. No longer! Purchases that exceed the credit limit even slightly are being denied. Consumers wishing to avoid that embarrassment simply remove some items to keep their balance lower.

Internet shopping has become victim to the same trend. Research estimates indicate that as much as 59 percent of online purchases are being dumped before checkout. Much of this is attributed to the costs that are tacked on as one proceeds through various steps, including taxes, handling fees, and shipping charges. Some internet companies are reducing the number of steps in a purchase, as well as posting the costs up front, in order to retain customers.

Hopefully, the days of changing one’s mind will soon return.

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September 8, 2009

Cyber-Shopping Anyone?

In a country that is so highly attached to Internet access and the latest high-tech gadgetry, Canadians are slow to adopt the trend of cyber-shopping – shopping online. Online sales have certainly been growing at a steady pace – a 61% rise in three years – but they still lag behind online sales in the United States.

Analysts attribute Canadian reluctance to become cyber-shoppers to several factors. High shipping costs in Canada have caused a large number of shoppers to abandon their online purchase before completing the transaction. Additionally, when it comes to security, Canadians are far more sensitive than most other nations around the world. Simply put, many Canadians have an abiding fear of credit card fraud and are skeptical about revealing their credit card details online.

On the other hand, the rise of specialty brands online is winning over Canadian reluctance. The allure of securing hard-to-get brands or one-of-a-kind items has been a boon for many online retailers.

Some of the nation’s larger retail outlets use their websites primarily for marketing and rely upon their sites to attract buyers to their stores. This has allowed a market to open up for smaller retailers whose “primary store” is located on the Internet.

Consumers still expect top service wherever they buy. For online stores, this translates into speedy and affordable delivery as well as reliable customer service. Moreover, online stores must market their sites in a variety of ways if they are to be noticed.

The variables of the economy affect the online stores as much as traditional shopping outlets. When consumers are in a spending mood, they are more likely to shop for items online that may be frivolous or unnecessary. However, when belt tightening begins, online retailers have to rapidly shift their focus to marketing items that are more affordable.

With annual sales in excess of $15 billion, and growing, cyber-sales seem to have carved out a niche with the Canadian consumer.

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September 7, 2009

Visa to the U.S.

Gone are the days when a Canadian family would hop in the car and drive down for a day to the closest city in the U.S. to do a little shopping. But the desire to purchase certain goods in the U.S. still exists. Now, in the world of eCommerce, a British company has made shopping in the U.S. available to Canadians while staying at home.

Borderlinx, headquartered in the U.K. with additional offices in Brussels, was established by experts in eCommerce, logistics management and international trade. The company enables U.S. retailers to sell their products to a global marketplace by providing innovative eCommerce management solutions. Similarly, consumers globally are provided access to the best quality products at the best possible prices.

Canadian Visa credit card holders are now able to purchase goods online from American retailers with relative ease. Through Borderlinx, Canadian shoppers are provided with a U.S. address and shipping services. This makes previously hard to access stores as simple as shopping from the store around the corner. Studies conducted by Visa revealed that 37% of Canadian online shoppers prefer shopping from U.S. stores due to the variety of products available. The Borderlinx service simplifies the shopping procedures and provides an on-screen calculator that allows shoppers to know exactly what will be the final price of their purchase. Additionally, shoppers through this service have the option of consolidating their purchases from several U.S. stores into one shipment, thus reducing shipping prices.

Canada is the first country to utilize this shopping agreement with Visa although other countries are expected to join later this year.

In the current economic climate, when consumers are careful how they spend their money, this new service affords shoppers an excellent way to make informed shopping decisions.

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