David Chilton, author of The Wealthy Barber , says that “The worst thing that’s happening to Canadians in the last 20 years has been lines of credit.” I think the reason for this is more than just the temptation of available credit. Chilton popularized the idea of paying yourself first by saving 10% off the top each time you get paid. A big problem with lines of credit is that it undermines your ability to know whether you’re truly saving any money. Moving $500 into your RRSP may not help much if you also borrow another $1000 on your line of credit. Back when Chilton wrote The Wealthy Barber , the world was a different place. People who saved 10% of their pay and managed to pay their mortgage and any other fixed-payment debts could have some confidence that they were making progress in their personal finances. But today, with a varying debt in a line of credit, it isn’t obvious whether we’re making progress. Over time we can see if we’re falling behind, but we don’t have the ...

A friend I’ll call Tim had an interesting experience trying to open a secured line of credit with PC Financial. He was told that the processing fee for home appraisal and basic legal fees would be $150. However, he was later contacted by another organization looking for another $83. It turns out that PC Financial hires other organizations to handle some aspects of checking people’s credit worthiness. In this case, there happens to be a “Writ of Execution” against another person with the same name as Tim (including first name, last name, and middle initial). This other organization wants the extra $83 to cover their cost of having Tim sign an affidavit stating that he isn’t the same person as the deadbeat in addition to the cost of having the document properly witnessed. Tim was a little suspicious and contacted PC Financial about this extra charge. PC Financial confirmed that the charge is legitimate. (I suppose that “legitimate” is in the eye of the beholder here. At least ...

Commentators frequently recommend that people negotiate the interest rate on their mortgages, lines of credit, GICs, and other loans and investments. But not much is usually said about how to go about such negotiations. I don’t have all the answers, but I did recently negotiate for a better interest rate on a line of credit. The process surprised me in a few ways. I have an unsecured line of credit that has been mostly dormant for 17 years. A recent temporary need for money led me to use it and find out that the interest rate I’m being charged is prime+4.5%. After a quick poll of friends, it seemed that I could certainly do better. I decided to do what I could to reduce this interest rate as quickly and easily as I could. I figured the easiest way to proceed would be to simply call the bank’s general phone number and provide an update on the 17-year old information they have about me. Surely it would be obvious that my financial circumstances warrant a lower interest rate. ...