What’s your favourite credit card?

September 29 2008 by Ellen Roseman

Frquent flyer points piling up? No way to use them all?

Maybe you’ll be better off with a cashback credit card. There’s a great variety of cards that send you a cheque each year or provide meaningful discounts on merchandise you plan to buy anyway.

I did a column last Sunday, which left out a few cards that readers really liked and wanted to share with others. (Biggest omission — Citibank.) Please nominate the cards you think provide great value.

I also found an interesting discussion a year ago at Million Dollar Journey of cashback credit cards and reward credit cards with no fee. His favourite is the MBNA Starwood Preferred Guest credit card, described here.

How to invest in a bear market, two

September 25 2008 by Ellen Roseman

When I started this conversation in late July, I didn’t expect things would go off the rails so quickly. Now the United States is trying to push through a $700 billion (U.S.) bailout of financial institutions that may not even stem the tide of bad loans and bad paper.

Stay the course. Think long term. That’s the main message you get from your financial advisers if they bother to call or write during this crisis. Many don’t, according to consultant Dan Richards.

I have a financial adviser for my RRSPs, who called me twice last week. She said my portfolio looked good. She did agree to change a couple of my riskier holdings, at my suggestion.

I also have a self-directed account, where I also made a few changes. I realized that I should be taking some of my gains off the table. So I sold half of the stocks that were up substantially.

It’s hard to stand by and do nothing when markets are so uncertain. Working in the media, getting all the news and rumours, I find it hard not to worry when this crisis seems worse than others that have preceded it. But with the cash in my account, I’m also buying a few stocks that seem depressed.

Last week, I wrote about Ted Rechtshaffen, a certified financial planner who has borrowed more than he needs for a new house and is buying stocks with leverage. He has an update for me below.

Now that things are bad, are you staying the course? Or are you wavering? Please keep the comments coming.

The one-day wonder

September 16 2008 by Ellen Roseman

I write columns in both the Saturday and Sunday papers. So when I get into work Monday, I find a pile of problems that readers have sent me, waiting to be investigated.

All day, I send emails to different companies, asking them to review complaints and fix them. Smart companies snap to attention, hoping to get a favourable mention. Sometimes, they send me a reply within hours of hearing from me.

Y-S Columbus Leo, for example, wrote to me about a Citi Petro-Points credit card offer. He felt it was deceptive and he offered to fax me the terms and conditions. By the time I got his fax the following day, Citi had already given him back the money he felt he deserved.

I’ll let him tell his story below and I’ll provide some other stories of one-day wonders.

Should Canada invest in financial literacy?

September 11 2008 by Ellen Roseman

I just came back from a conference in Montreal. We talked about how to raise the level of financial awareness in Canada.

Is there a link between better financial education and better financial decision-making? The research isn’t clear. Lauren Willis, a law professor writing in Money magazine, says we should just give up on educational efforts.

Stop trying to turn everyone into a financial planner. Instead, try to get everyone to understand that the people selling you financial products often don’t have your best interests at heart.

In my panel discussion, I agreed that we shouldn’t teach people about products — since the products constantly change. We should teach them to take a skeptical attitude, to ask questions and to stop being so trusting.

Why do some folks believe what they’re told by someone whose only goal is to get them into a deal that they can’t extricate themselves from without a stiff penalty? I wish I could get everyone to ignore door to-door salespeople, seminar sponsors and telemarketers. Just say no.

Many international experts came to the conference to talk about how they’re trying reach, teach and change behaviour.

Britain, for example, has introduced tax-free investment accounts for newborn babies. The government is giving vouchers worth about $500 to every child in the U.K. born after Sept. 1, 2002. The children get another $500 voucher when they turn 7.

The parents can invest the vouchers, but not touch the capital. When the children turn 18, they can withdraw the money for any purpose.

The Child Trust Fund (now closed to new accounts) is designed to change the savings habits of a new generation of British citizens. But some parents, it seems, can’t be helped. About 350,000 vouchers worth $200 million had been left to languish in the first year

“It seems you just can’t give money away,” said one British financial executive. However, many parents have made significant extra contributions to the tax-free savings accounts.

In New Zealand, the government sponsors TV commercials with the slogan, “You’ll lead a richer life when your money’s sorted.” The slang term “sorted” or straightened out is the branding for a rich financial literacy program that has been going for 15 years and includes a website.

In the private sector, a big U.S. bank has given away 60,000 copies of a book, The Citi Commonsense Money Guide for Real People. It uses major life events, also called “teachable moments” to bring home the need to save and invest.

Finally, a U.S. financial regulator has organized a website that’s aimed at groups, such as seniors and soldiers, who are often exploited. There, they can find online help that is full, fair and free for the asking.

I’m excited about what other countries are doing and hope campaigns will be launched in Canada. Such help is needed as the economy goes into a downturn and debt-to-income levels rise higher than ever before.

No RESP-ect for group scholarship plans

September 7 2008 by Ellen Roseman

I drew lots of flak about my column last week about a new report for the federal government about RESP industry practices. Canadian Capitalist also wrote a post about this report.

People thought I was criticizing the whole idea of saving for post-secondary education. They also thought I was too hard on the old-fashioned group scholarship plans.

So, let me admit that I had RESPs for my two boys with Canadian Scholarship Trust. (The self-directed plans weren’t around when they were young.) Both have now finished a four-year BA program, so I got my money’s worth, so to speak.

But I often hear complaints from readers about the rules governing group scholarship plans. You pay the enrolment fees up front — and 20 per cent of gross contributions went to fees in 2006, according to the report — but you lose that money if you have to close the plan before maturity. It’s deducted from your refund.

Also, you lose out if your child starts university at a younger age (see comment below) or if your child takes only a year or two of post-secondary education and drops out.

I suspect that the new tax-free savings account, coming next year, may cut into the RESP market. You can save for anything you like without paying tax on the investment income (up to $5,000 a year) and you don’t have to worry about children going to college or university or staying enrolled past the initial years. The money isn’t earmarked for a specific purpose.

Of course, you don’t get the same forced savings effect. And you do give up the 20 per cent Canada Education Savings Grants that come with RESPs. But for some contributors, the much greater flexibility of the TFSA will be worth the tradeoff.

A complaint is a gift

September 2 2008 by Ellen Roseman

That’s the title of a book I just picked up. The message is music to my ears.

The authors, both management consultants, say that customer complaints are not annoyances to be dodged, denied or buried. Instead, they are valuable pieces of feedback that can be used to improve an organization’s products and services.

The book is dedicated to Confucius, who wisely pointed out, “A person who commits a mistake and doesn’t correct it is committing another mistake.”

I love it when companies take mistakes to heart. They’re happy to get the complaints I send and rush to correct not just the individual’s problem, but the systemic problem.

Future Shop, for example, welcomes complaints from the media, as you can see from the comment below. But the ordinary shopper doesn’t get the same warm reception.

What happens when you complain? Do you get treated as an annoyance or a pain in the butt?

On the other hand, do you ever feel you were appreciated as a messenger telling the company what is going wrong and can be corrected?