Monthly Archives: March 2010

When Pre-Approved Credit is Good

Last night I called Visa about a few things. One of those things was to ask for a credit increase.

I don’t need a credit increase really, as I only use my credit card when I am back in Canada, but my current plan is take a temporary hit on my credit score in order to have a stellar report 4 or 5 years from now when we are  in the market to buy a place.

When I am back in Canada, I use my card for about 90% of my purchases. This results in using about 50% of my available credit. Having a high ratio (amount charged to amount available) is a bad thing for your score, so I wanted to increase my limit, so that when I travel the same purchases will only be about 30% of available credit.

The chap I was talking to said that I have a pre-approved credit increase available on my account. It was less than I was asking for, but by going this route I have achieved nearly the same effect without affecting my score.

The reason, as I was assured by the rep, is that pre-approved increases on existing accounts have no bearing on your score because it is a completely internal review; there is no inquiry into your entire credit report. It is completely based on your account history and the assets you hold with the bank.

Let’s be clear here. I am not talking about getting a piece of junk mail for a pre-approved card. That will affect your score if you apply, as it would be a new account. I am talking about a pre-approved increase on an existing card.

My next question for the lad was why I didn’t know about it. I have electronic statements, so shouldn’t I have gotten the offer by email? Not necessarily, he said. Some times the pre-approved increases are on the account, but are only mentioned if the customer happens to call.

It was nice to know that the companies aren’t always soliciting for more credit, but that there are instances where they will work with you if there is communication. That was a little reassuring.


Inquiring Minds Get Paid

In January I noticed I had an interest charge on my brokerage account of about $15. It was for one month at 21% per annum. Worse than a credit card.

At first I thought it was due to my transferring some stock to another account, but the more I thought about it, and the closer I looked at my transaction history, the more I realized that that couldn’t be the case.

I called them tonight to inquire. At first, they said the charge was due to an outstanding balance for the time period. I knew there was no possibility of me having and outstanding balance, so I asked the call representative to look into it.

After about 5 minutes he came back to confirm my suspicion that the brokerage had made an error. He apologized and said my account would be credited accordingly. I thanked him and asked a dollar amount. It was the same amount that was taken from my account incorrectly.

I had two choices at this point:

  1. Accept the return of my money.
  2. Accept the return of my money and raise a stink.

I chose path two by pointing out the fact that they saw fit to incorrectly charge me 21% per annum on one month’s balance, yet were only willing to compensate me the original amount, even though I have been out that money for two months. I should be paid interest for those two months.

Let’s take a pause to point out the fact that I was asking for the same terms… which on $15 would work out to about 53 cents.

He came back about a minute later to offer me a “good will gesture” of a rebate on my last stock commission in addition to my returned money. At $19 savings, that was about $18.50 more than I was looking for.

It just goes to show ya… it never hurts to ask. You just might get more than you were hoping for.

Canadian Tax Treaties

If you live away from Canada, it is important to understand not only your rights and responsibilities in the other country, but also your rights and responsibilities with regard to Canada.

One of the most important things to understand is your responsibility to pay taxes. However, a more important thing to remember is your right not to pay too much in taxes.

Canada has treaties with a plethora of countries for the understanding that there shall be no double taxation.  For the most part, this means that if you pay income taxes in a foreign country, you are exempt from paying taxes in Canada.

Not having to pay taxes in Canada, and not submitting a tax form in Canada, however, are two entirely different things.

Depending on your work situation, and if you are recognized as a Factual Resident of Canada, you may be able to submit your Canadian tax form, declare world income, deduct that income, and receive RRSP and TFSA contribution room.

Remember, though, this is only in regard to your foreign income. You are still responsible for reporting and paying taxes on and Canadian income, interest, dividends, or capital gains.

That being said, unless you are making 20 grand in dividends and interest, you probably won’t have to pay taxes anyway.

Post Comments

I’ve had a couple comments sent by email that I thought would be beneficial to have in a post.

In response to this March 10th entry, Zark made some points about the $20 vs. $25 dollar experiment that some people have trouble waiting for a more beneficial outcome. He likened it to day traders, who probably don’t make as much in the long run compared to a long-term value investor, but who get the thrill out of making a couple hundred bucks in an afternoon.

Cathy  gave a good addition to this entry on taxes and kids that if you are a single parent, you can claim your oldest child as an “equivalent to spouse,” which will give you extra tax credits. You can find out more here.

While searching for information on that, I found this, which is about writing off adoption expenses.

Also, feel free to use the comments section (click “Leave a Comment”).

A Look at the WestJet MasterCard

I’m in the market for a second credit card (for a reason I’ll explain in a future post) and thought the new WestJet MasterCard from RBC would be the thing. I’m not so sure anymore.

The reasons I was interested in it were:

  1. One percent of all purchases (or 1.5% for the premium card) would accumulate in WestJet “dollars” that could then be used to buy WestJet tickets.
  2. I thought the 1% card may be fee-free.
  3. I figure we will be flying a fair amount once we move to Canada, so stocking up on WestJet dollars would be of future use.
  4. It is through RBC, meaning I can easily take care of it through my online banking.

Then they announced further details of the cards. The basic card will have an annual fee of $39, and the premium card will carry a charge of $79. At $39, you would have to charge $3900 to your card just to break even of the annual fee, assuming normal purchases. Not exactly what I have in mind as a second card.

The first year would be a little cheaper, however, as the first time you use the card you are given $25 WestJet dollars ($100 for the premium card) meaning that the first year you only need to charge $1400 to break even.

Depending on your situation, how much you charge, and how much you fly, this card may be for you. If you do fly often, a bonus of 0.5% is added when you use your card to pay for WestJet tickets. Considering I currently only put about $2500 on my main card per year, I’ll have to do a little more thinking.

Lessons From Aesop

One of the textbooks I use in class has a story called “The Hungry Lion,” which is based on a fable by Aesop.

Basically, a hungry lion goes out looking for food. He sees a rabbit and begins chasing it. As he is about to catch it a deers runs by. The lion wants a big dinner, so begins chasing the deer, but he is tired from chasing the rabbit, so the deer gets away. The rabbit is long gone.

The story finishes with the line: “Sometimes we are like this lion.”

It got me thinking about the folly and danger of chasing returns and searching for yield.

It has been an amazing 12 month period for equities, but that doesn’t mean, by any stretch, that the next 12 months will be good. Ford is up over 450% over the past year, but you would be hard pressed to duplicate that run. Chasing the returns of the gems of the last year could very well result in little to negative growth.

Likewise, with the low-interest rate environment that we are currently in, some may try to find higher yielding securities, which may not be best for their portfolio, let alone their peace of mind. You could buy Jazz Air Income Fund for it’s 17% yield, but you should probably dig a little deeper into a company whose main source of income is the infamous Air Canada.

There is nothing wrong with changing your portfolio or plan as things change in you life. We all need to make adjustments. Just be careful that you are not giving up a perfectly good rabbit for a potentially elusive deer.


Foreign Content Mondays

This is more of an announcement rather than an informative post, but the plan from here on in is to dedicate occasional Monday posts to foreign content.

If that sounds vague, well, it’s because it is.

At first I wanted to have Japan Monday. Then I though about Asia Monday. I’ve settled on Foreign Monday just because it allows for a wider range of possible topics.

That being said, a good number of posts will most likely be similar to last Monday’s post – information and helpful hints for foreigners living in Japan.

If anyone has ideas for this section, or wants to know how certain issues/treaties affect you, email me and I can try to find out or point you in the right direction.