Debt & Frugality

As Didi says in the novel (Findependence Day), “There’s no point climbing the Tower of Wealth when you’re still mired in the basement of debt.” If you owe credit-card debt still charging an usurous 20% per annum, forget about building wealth: focus on eliminating that debt. And once done, focus on paying off your mortgage. As Theo says in the novel, “The foundation of financial independence is a paid-for house.”

6 ways to protect your Business from Credit Card Fraud

Posted By |
Image by Pixabay

By Martha Pierson

Special to the Financial Independence Hub

We all want to do our best to provide our customers with the utmost convenience. Isn’t this the whole point of eCommerce, POS financing, and other recent developments in sales?

Unfortunately, with these conveniences also come increased risk. In fact, this article is going to discuss one of the dangers brought about by technology and its added convenience. That is credit card fraud.

Recent statistics point out that 47% of Americans experienced some form of financial identity theft in 2020. More importantly, credit card fraud, especially those related to new accounts, was reported as the second-worst reported following scams related to government benefits.

It is, indeed, very troubling. Fortunately, there are ways to prevent and minimize such malicious attacks. Here are six tips that both business owners and lenders (such as POS finance providers) can put into action:

Tip #1: Invest in Technology

There are numerous technologies that can help minimize credit card fraud. We simply need to take advantage of them.

For instance, declining cards without an EMV chip is a good first step. Not only does EMV provide another level of encryption, but chipped cards also generate unique codes after every transaction. These features make it impossibly difficult for thieves to create counterfeits.

You can also invest in incorporating a fraud prevention system into your eCommerce website. These platforms are easy to integrate and provide real-time protection for every transaction. Most of these programs can help you screen and authenticate customers, prevent fraud, and even identify vulnerable accounts.

You might also want to look into any advanced payment security feature that your eCommerce platform offers as an add-on.

Tip #2: Beware of Red Flags

Speaking of identifying vulnerable accounts, the next best step to prevent credit card fraud is to simply be aware of the red flags. For example, a person reaching for a credit card from his pocket rather than from his wallet is certainly suspicious. The same can be said for an online customer with multiple failed attempts to purchase due to incorrect information.

Of course, we’re not saying that these red flags automatically point out that one is committing fraud for sure. For all we know, that online customer simply had his caps lock on the whole time. Or maybe the previous customer just shoved his credit card into his pocket for no particular reason.

In the end, the skill to discern fraud can simply be achieved over time through the practice of vigilance and experience.

Tip #3: Increase the Quality of Employee Training

So you now have an idea on how to catch credit card fraud. The question is, are your employees equally equipped as well? Unless you manage every aspect of your business on your own, it is imperative for any business owner to make credit card fraud a part of their training.

We also recommend developing a clear procedure that your employees can follow. Here’s an example for in-person transactions.

  • Check the customer’s ID for every credit card transaction.
  • Make sure that the credit card doesn’t look tampered with in any way.
  • Use an Address Verification Service to confirm the cardholder’s billing address.
  • Finally, compare the receipt with the actual card. Check for any errors and inaccuracies. Continue Reading…

GICs with an equity twist: RBC’s latest solution for Canadians looking to grow their savings

Posted By |

 

By Flora Do

Vice-President,

Term Investments & Savings, RBC                  

(Sponsor Content)

Remember piggy banks? I sure do. Piggy banks stuffed with loonies, quarters, dimes, nickels and pennies (remember pennies?) My piggy bank helped me save for so many precious purchases when I was growing up.

During those childhood years, my piggy bank was the equivalent of a low-risk savings vehicle (I’d say ‘no-risk’ but it did shatter if dropped).  I knew exactly where my money was and how much I had. The only thing the savings in my piggy bank could not do was grow on their own.

I wasn’t yet an investor; I was a saver. Today I lead a team which helps Canadians to be both, through a solution we’ve just reinvented: the humble GIC (Guaranteed Investment Certificate).

For decades, GICs have been the preferred choice for Canadians looking to invest savings, with the guarantee that their initial investment (principal) would be fully protected.

The market stepped things up by giving some GICs an equity twist – tying GIC returns to the equities markets – for Canadians seeking the security of GICs but looking for opportunities to increase their return potential. As with traditional GICs, an investor’s initial investment is 100% guaranteed. Unlike traditional GICs, equity-linked GICs are connected to stock market performance, linked either to various indexes or a basket of stocks, offering investors potential gains from market returns.

New GIC linked to ESG

Specifically at RBC, this summer we introduced our first GIC based on ESG (Environmental, Social and Governance) factors – the RBC ESG Market-Linked GIC – and our first GIC to track the performance of a customized basket of 20 North American companies – the RBC North American MarketSmart GIC.

Our ESG GIC is a direct response to the growing interest we’ve been seeing among Canadians in looking beyond a company’s balance sheet when making investment choices. If you’re an investor who wants to help make a difference in the world by including ESG considerations in your investment decisions, our ESG GIC is purpose-built for you. It’s linked to a global index of environmentally and socially responsible organizations, all of which must first pass a set of rigorous ESG standards. To be included in the index, each company must demonstrate positive ESG metrics, low carbon impact and strong financial health. Continue Reading…

Getting your Fixed Income Fix with BMO ETFs

Posted By |

This article has been sponsored by BMO Canada. All opinions are my own.

Fixed income doesn’t get enough attention on this blog, mostly because I’m still in my accumulation years and invest in 100% equities across all my accounts. But most investors should hold bonds in their portfolio to reduce volatility and so they can rebalance (selling bonds to buy more stocks) whenever stocks fall.

In this post we’re going to take a deep dive into BMO’s line-up of fixed income ETFs. We’ll see that there isn’t a one-size-fits-all approach to investing in fixed income, and that investors can capture yield using a wide array of products and strategies.

DIY investors should be familiar with BMO’s suite of fixed income ETFs. It’s the largest in Canada with more than $23 billion in assets. At the top of the list is BMO’s Aggregate Bond Index ETF (ZAG) with total assets of $5.86 billion.

Robo-advised clients also have BMO fixed income ETFs in their model portfolios:

  • Nest Wealth clients hold BMO Aggregate Bond Index ETF – (ZAG)
  • Wealthsimple clients hold BMO Long Federal Bond Index ETF – (ZFL)
  • Questwealth clients hold BMO High Yield US Corp Bond Hedged to CAD Index ETF – (ZHY)
  • ModernAdvisor clients hold BMO Emerging Markets Bond Hedged to CAD Index ETF – (ZEF)

BMO Fixed Income ETFs

Investors are nervous about holding bonds today. Interest rates are at historic lows, and when rates eventually rise, we’ll see bond prices fall – especially longer duration bonds. We’re also seeing higher inflation, which causes interest rates to go up (and bond values to go down).

Q: Erika, investors are concerned about low bond returns, particularly from long-term government bonds. How should they think about the fixed income side of their portfolio?

A: Investors should think of fixed income as a ballast in their portfolio. It helps reduce overall volatility (chart below). Correlations between US Treasuries and stocks (represented by the MSCI USA index) have been negative over the last two decades. All that to say, when stocks fall, bonds tend to do well.

BMO figure 1

What the new Higher Stress Test means for Homebuyers

Posted By |
Image courtesy of Loans Canada

By Sean Cooper

Special to the Financial Independence Hub

Ever since the start of COVID, the real estate market has been on fire. To help deal with the record level of activity in the real estate market and also keep things balanced, a new mortgage stress test was introduced June 1st. In this article we’ll look at the new mortgage stress test and how it affects you.

What’s the Stress Test?

The stress test is a measure that anyone buying a home, refinancing their mortgage or switching mortgage lenders must pass. Pretty much the only time you don’t have to pass the stress test is when you’re renewing your mortgage with your existing lender. Whether you’re buying a home with less or more than 20 per cent, it doesn’t matter. You’re affected by the stress test.

The stress test was introduced several years back to help protect homebuyers from becoming overleveraged and taking on too much mortgage debt. Prior to the stress test, you only had to prove that you could afford mortgage payments based on the mortgage rate when you first sign up for your mortgage. However, with Canadians spending more and more on homes and the threat of higher interest rates looming, the Canadian government decided to introduce the stress test in early 2018 out of precaution.

To pass the stress test, you need to show that you can qualify at the greater of your mortgage rate plus two per cent and the stress test rate (currently at 5.25 per cent). With mortgage rates currently somewhere in between the mid one percent’s and the mid two per cent’s for both fixed and variable rate mortgages, you’ll almost always have to qualify at 5.25 per cent as things stand today.

How has the Stress Test changed?

The new stress test rules came into effect June 1st. Prior to the introduction of the new stress test rules, the mortgage stress test rate was 4.79 per cent. That’s because it was based on the average of the big banks’ posted mortgage rates. However, the government decided to change how the stress test was calculated. Continue Reading…

7 things you can do now to have a Debt-free Life

Posted By |

By Emily Roberts

For the Financial Independence Hub

Living debt-free might seem like a distant pipe dream to many, and that’s unfortunate. Being crippled with debt is difficult, and even more so when you feel like the situation is hopeless. The reality is that most people who have large amounts of debt could be making simple steps every day to turn their situation around. The issue for many is knowing where to start. Let’s take a look at what you can do today to get on the road to a debt-free life.

Take a long hard look at your Financial Situation

The first thing you have to do is know exactly how much debt you have. This will allow you to get a clear assessment of your finances and start working on repaying them. Not only that, but there could be cases where your situation might not be as bad as you thought. For instance, did you know that entries on your credit report have to be removed after a certain period? This means that some of the debt that you thought you had may have been expunged from your report a long time ago. This is why you need to keep a close eye on your credit report and get your annual statutory copy from the one of the three major credit reporting agencies. Once you know exactly what you owe, you can build a plan.

Call your Creditors

The next thing you have to do is get in touch with your creditors and work on a plan. There are some cases where you can work with a professional who will help consolidate all of your debt and have you pay a fixed sum per month. This can be a good option in some cases, but you don’t necessarily have to hire someone. Calling your creditors and speaking with them directly could help you shave off a few dollars of your debt. Also note that the more you can pay upfront, the more they will be willing to lower the amount of money you owe. Try to get them to report the payment to the credit reporting agencies in writing as well so it can be reflected on your credit score.

Use your Credit Cards wisely

If you have multiple credit cards, we would suggest that you start paying them off one by one. Tuck away the one with the highest balance and commit to paying it in full. Set up automatic payments if you have to. This will allow you to both reduce your overall debt and significantly improve your credit score by lowering your credit utilization ratio.

You then have to use your other cards wisely. A lot of people believe the myth that paying the minimum is something credit card companies will reward, but that’s complete hearsay. In reality, companies love people who use credit responsibly, and one of the best ways to do that is to use as little of your credit as possible. So, if you want to be viewed favorably by creditors, aim to keep your total utilization ratio under 30%.

If you want help with credit card debt and feel like you don’t have the discipline to pay them off on your own, we suggest you check out Tally. Their app will allow you to manage your credit cards all in one place and could even help you save on interest if you qualify for their low-interest line of credit. They will help you pay your cards automatically through an easy-to-understand interface, ensuring you don’t have to deal with a late fee ever again.

Know what you’re signing up for

Very few people take the time to read the fine print when they get a credit card and more people should. One piece of research reviewed credit card agreements for clarity and found that the majority of people surveyed could not understand them. That’s a big problem when considering that credit card agreements can include provisions that will allow them to change the interest rate at will. Continue Reading…