Your Money Book

A few months ago we covered a little about phishing – with a “ph.” It’s the millions of e mails sent blindly hoping to get you to click on the link and supply personal information. They’re often from Paypal, E Bay or the Royal Bank claiming your account has been frozen for irregularities. I received three about the Royal Bank and I sure don’t deal with the mega banks. They’re always, always fraudulent so never ever click on them. Think about it, I’d bet your bank doesn’t even have your e-mail address and they never communicate with you by e-mail.

The newest, and way more sophisticated con is called whaling. Whales are big – that’s the implication here. These are e-mails specifically targeted to executives, business owners and big cheeses. These are researched and written very well.
They are generally claiming to be from the Better Business Bureau, a vendor request for invoice information, from a lawyer with a summons or a recruiting firm.

What the crooks want in this case is to have you click on the attachment. Once that’s done, the spyware installs a key logger program that detects all your key strokes on the computer.

They’re not looking to tap that note to your sister, but the spyware is sophisticated enough that the crooks can detect when you’ve logged onto a bank site, your brokerage account or the likes. It then picks up the log in and passwords you’ve entered and as soon as you’re logged out, the crooks go in and clean out the account.

This is a really, really nasty scam that’s hit hundreds of executives already because it’s well researched, written and targeted.

Just make sure you run your anti-spy software regularly and follow my number one rule for these things and any attachments you don’t recognize: Just don’t click!

A month ago we talked about the tools and insights of how to get your credit card interest rates lowered and here comes the NDP.

Their web site now has the same information we last month. That’s great – the more people have these tools the better. But the NDP takes it another step beyond what I believe is logical.

The web site actually states: Help Jack Layton take on the Harper government to lower credit card rates. Yup, in politics anything is possible – even blaming the government for credit card rates. Bet you didn’t know it was Prime Minister Harpers’ fault. Maybe the government is to blame for the Canucks missing the playoffs, too… Give me a break.

Peggy Nash is the NDP Industry critic, and I actually heard her being interviewed. Yes, the NDP believes that banks should be forced to lower credit card rates across the board. How about we force Canadians NOT to carry credit card balances? How about we outlaw credit cards? Wouldn’t that be a lot more logical?

She was asked whether it isn’t reasonable to conclude that forced lower rates wouldn’t really be part of a free-market economy and wouldn’t a lower rate get people to just increase their debts? Nope – she didn’t see that at all.

Perhaps it’s time we pass a law for car dealers to lower prices and everyone should pay the same amount. Come on!
Reflecting about this backwards thinking got me wondering if there is ever a time where I might confuse someone. The government isn’t responsible for our financial situation. They don’t use our credit cards, didn’t sign our mortgages and didn’t force us to get a line of credit or car payments that are way longer than the life of the car.

Getting into debt was our choice. It’s always a choice – and getting out is a lot harder. But the party ends eventually and there is always a price to pay for all of our financial actions. But perhaps it is less and less politically correct to talk about personal accountability in so many areas of our life.

Last week you gave me the heads up on a newly release International Monetary Fund report. This IMF report claims that the “global credit crunch will cause losses of nearly $1 trillion worldwide.”

But I’ve got a question: How can a credit “crunch” cost $1 trillion? That was the headline in the USA Today report but think about it. A credit crunch is NOT lending. And NOT lending can’t create a loss; it saves lenders from potential losses.

With these types of headlines, there’s often the choice to be dramatic instead of informative, I’m afraid. What they meant to highlight is that the mortgage problems, mostly subprime, that is poor credit mortgages, will create huge financial losses. Now the IMF is a pretty political body and they’re often late to the party, because I would suggest it’s going to be well beyond $1 trillion when the dust settles. Try $1.5 or $2 trillion, but that remains to be seen and it’s only my opinion.

But there’s some good news, because not every lender was caught up in the subprime fever where financial institutions from Germany and Denmark to Asia and North America were somehow caught by surprise that the loans to bad credit customers could possibly go sour.

And both these good news stories are from right here in Canada. One is ING Direct and here’s the difference: They keep all their mortgage loans on their books. So they’re really really invested in making sure they’re good quality. They weren’t taking whatever they could get their hands on and re-selling it before it started to smell.

The other one is Canadian Western Bank. There is a great quote from CEO Larry Pollock: “We’re not smart enough to understand that stuff,” which he gave as a reason for not investing in these off-balance sheet SIVs. Oh, they’re plenty smart and it’s the reason it’s the best performing bank stock in North America!

Shell has just rolled out “Pay By Touch” biometric payments. We talked about it a few months ago and now it’s here. Yes, you just need to give them your fingerprint as payment, which is hooked to your credit card. Right now, don’t look for it here, it’s just in Chicago area Shell stations and stores.

E-bay recently started their very own gift cards, for sale through 10,000 grocery stores. But you can also get them on-line to e mail to anyone you choose for amounts under $500. But I have a question: With tens of billions of gift cards sold each year, stores get a commission for selling them. What? You thought they sell them to help you out? Nice try. So when we buy the directly from the retailer how come we don’t get a discount?

There is now something called a virtual or disposable credit card. It’s a one-time use card. You get a temporary number that’s linked to your real credit card number and it’s governed by your same cardholder agreement. But it makes nervous people happy as they can use it on-line, and with merchants they don’t really trust. Right now they’re issued by Bank of America and Citigroup. But I never understand why so many people spend all that energy worrying about this kind of stuff. Repeat after me: By law, you are NEVER on the hook for any fraudulent charges on your account. Relax…

An RBC Survey last fall reported that about half of all new mortgages made in Canada are 40-year terms. Great news for lenders – probably the worst news for those who actually do it. It’s financial suicide: On a $200,000 mortgage the payment might drop $160 a month, but you’re adding $173,000 of interest. I can think of at least five or six ways to make a 25-year mortgage work, instead of this, and it’s not a stretch to figure there are hundreds of things I’d rather do with $173,000 interest than gifting it to one of the mega banks!

Last month, Visa issued a $19 billion public offering. That was one of the biggest private offerings ever, and on March 18th, the first day of trading, the shares opened at $44. By the end of that day, they were at $56. Debt really does pay if you’re a shareholder, but NOT if you’re broke and paying the interest on the other end of the food chain!

If you’ve got a chequing account here’s something that’ll be of interest. And since that’s almost 99% of us, it’s worth knowing:

A number of U.S. banks have recently purchased some special software to use for their computers. This software is designed to maximize N.S.F. charges on accounts.

Now before we go any further, I have no clue if any Canadian banks have similar software. I have no reason to think they do or to think they wouldn’t be interested in it.

This was a report on the Atlanta based Clark Howard show two weeks ago, and it’s pretty scary. Let me explain: Let’s say you have $500 in your chequing account and there are a number of cheques that you’ve written. You’ve written 6 cheques for $50 each and one big one for $460. That’s a total of $760, so there’s going to be an N.S.F.

Don’t get judgmental right now, because stuff does happen, or banks wouldn’t be making billions in N.S.F. charges. Sometimes it’s carelessness, sometimes it’s as simple as not realizing that a deposit had a hold on it before writing cheques on the money.

Now logic in this example says put through the six small cheques for $50 each and bounce the big one. That’s one N.S.F. fee, now about $42. But this software is designed to get the most service charges out of the account. So the software works out that the $460 cheque should get cleared because then the six cheques for $50 each will all bounce!

So instead of one N.S.F. charge, that U.S. bank can charge six times $42 or $252 in service charges and it’s all legitimate.
In fact, one caller walked through, and documented this type of scenario and had $580 in service charges in one day, where it could have been $70 or so if the order of clearing the cheques had been done in his favour from smallest to largest.

No, this is not a reason to get an overdraft. Quite the opposite, since they just charge a lot of service charges and high rates on a permanent basis. I don’t even care if banks make a ton of profit, I just don’t want them to make it all from your listeners or anyone who uses the tools out of the It’s Your Money book.

(for US IYM: file complaint with the Office of the Controller of the Currency. Occ.gov!!