Personal Finance

Locked: ALERT! Some banks changed "high to low" payment allocation! WARNING!

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  • Jan 10th, 2019 2:55 am
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[OP]
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Aug 21, 2008
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MikeMontrealer wrote:
Apr 1st, 2012 12:55 am
How was it sneaky? I'm pretty sure they must have communicated the change, along with an offer to cancel the card if you found the terms disagreeable.

I know it's a favourite pastime to crap on banks but people have to take responsibility for understanding the terms of their financial instruments and any changes made to those terms.


IMO, it's sneaky because changing payment allocation from high interest first to proportional method is a major policy change and should be communicated well. I bet most RFDers still think if they have 2 different interest rates on their balance, banks will allocate payment to higher interest rate. They may pay 19% or more APR for some part of their balance and never have a chance to pay high interest portion unless they close their balance to "0".

Personally I did not know until a fellow RFDer posted the second option. When payment regulations changed in September 2010, they did a good marketing and we assumed that payment allocation will be HIGH to LOW.

IF ANYONE HAVE LOW and HIGH INTEREST RATES ON THEIR CC BALANCE, BE CAREFUL! YOUR PAYMENT MAY NOT CLOSE HIGH INTEREST RATE PART!

This is just a friendly warning as you may end up paying 19%+ APR for some portion of your balance although you follow and complete minimum payments requirement.
[OP]
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"In response to your enquiry dated March 30, 2012.

In Canada, the Financial Consumer Agency of Canada (FCAC), an independent body established to protect and educate consumers of financial services, is the agency responsible for the oversight of consumer issues in the federally regulated financial sector. The FCAC monitors and supervises these financial institutions to ensure they comply with federal consumer protection measures. The FCAC may be reached at:

Financial Consumer Agency of Canada
427 Laurier Avenue West, 6th Floor
Ottawa, Ontario K1R 1B9
Toll-Free: 1-866-461-3222
Toll-Free Fax: 1-866-814-2224
Website: http://www.fcac-acfc.gc.ca"



http://www.fcac-acfc.gc.ca/eng/resource ... p#lump-sum
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Dec 9, 2007
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HamsiBrain wrote:
Apr 1st, 2012 6:59 am
IMO, it's sneaky because changing payment allocation from high interest first to proportional method is a major policy change and should be communicated well. I bet most RFDers still think if they have 2 different interest rates on their balance, banks will allocate payment to higher interest rate. They may pay 19% or more APR for some part of their balance and never have a chance to pay high interest portion unless they close their balance to "0".

Personally I did not know until a fellow RFDer posted the second option. When payment regulations changed in September 2010, they did a good marketing and we assumed that payment allocation will be HIGH to LOW.

IF ANYONE HAVE LOW and HIGH INTEREST RATES ON THEIR CC BALANCE, BE CAREFUL! YOUR PAYMENT MAY NOT CLOSE HIGH INTEREST RATE PART!

This is just a friendly warning as you may end up paying 19%+ APR for some portion of your balance although you follow and complete minimum payments requirement.

Personally I think you are making a lot more of this than you really should be. First off until this regulation came into effect most credit card companies used the low to high payment allocation which was clearly not to the benefit of the consumer. After the regulation came into play some went to proportional payment allocation while others went to high to low method. Regardless of which route they decided to pursue and if they subsequently changed their mind they need to provide customes a change in terms communication, usually a letter. They can't just randomly change this and benefit from consumers being unaware.

Most consumers throw away any of these notices from banks and credit card companies without reading them carefully then cry bloody murder later for their own laziness/ ignorance. I have sent at least 10-20 of these straight to the shredder over the past couple years.

In my opinion proportional seems like a fair compromise betwee the interests of the bank and the consumer but I don't use my cards for BTs, maybe if I did I would have a different opinion.
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whodaphucru wrote:
Apr 3rd, 2012 10:20 pm
Most consumers throw away any of these notices from banks and credit card companies without reading them carefully....In my opinion proportional seems like a fair compromise betwee the interests of the bank and the consumer but I don't use my cards for BTs, maybe if I did I would have a different opinion.

Well, the main purpose of starting this personal finance post was to give a heads up to my fellow RFDers. I agree; We chose to ignore their letters as we know most of them are some kind of junk, promotions, extra service offers, etc.
Here is the most common scenario:

1. We chose to ignore their letters.
2. CC companies know our tendencies (they spent tones of resources for this) and send new term and conditions to show they follow the rules of the game.
3. They keep offer new promotions to lure us which has a promotional period end date just few days later than the new policy effective date.
4. Now you are one of the best customers of CC companies; have a balance and chained to pay 19%+ for some portion of your balance (no way to escape unless you pay them in full).
5. Banks and CC companies are one of the most profitable businesses although economy is in limbo and we lost thousands of job.


This is a major policy change and IMO most of us assume our payment to be allocated to HIGH to LOW as CC companies did a good marketing/PR work on this to HIDE the second method (proportional).
Again, if anyone has a long term low rate balance, your CC company will be more than happy to promote "0%" BT, etc to charge you BIG after promotional period ends as second part will not be expired until you close your account or pay both or all in FULL!
Sr. Member
Dec 9, 2007
537 posts
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HamsiBrain wrote:
Apr 4th, 2012 8:58 am
Well, the main purpose of starting this personal finance post was to give a heads up to my fellow RFDers. I agree; We chose to ignore their letters as we know most of them are some kind of junk, promotions, extra service offers, etc.
Here is the most common scenario:

1. We chose to ignore their letters.
2. CC companies know our tendencies (they spent tones of resources for this) and send new term and conditions to show they follow the rules of the game.
3. They keep offer new promotions to lure us which has a promotional period end date just few days later than the new policy effective date.
4. Now you are one of the best customers of CC companies; have a balance and chained to pay 19%+ for some portion of your balance (no way to escape unless you pay them in full).
5. Banks and CC companies are one of the most profitable businesses although economy is in limbo and we lost thousands of job.


This is a major policy change and IMO most of us assume our payment to be allocated to HIGH to LOW as CC companies did a good marketing/PR work on this to HIDE the second method (proportional).
Again, if anyone has a long term low rate balance, your CC company will be more than happy to promote "0%" BT, etc to charge you BIG after promotional period ends as second part will not be expired until you close your account or pay both or all in FULL!

I hear where you are coming from and it is good to share with others but at the end of the day we as consumers need to take accountability for our decisions and actions (ignorance is not a defense) and we can't blame credit card companies or banks for our actions or inaction. If we choose not to read our mail that really doesn't leave many options to communicate these changes to consumers.

Regarding profitability, are you suggesting that banks shouldn't make money? I don't have a problem with companies making money, if you don't like the amount of profitability or feel they are not being fair there is always the option to not use their services. Having strong profitable banks was a key part of why our financial system was not stressed the same way as US and European banks. A stable financial system is a pretty important thing.
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Dec 5, 2006
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But still, is it legal or not? Profit and morality are another. Story
[OP]
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smartie wrote:
Apr 5th, 2012 10:54 pm
But still, is it legal or not? Profit and morality are another. Story

Banks can chose either one of the options as per law. They made a big fuss when they introduced HIGH to LOW payment allocation (forced by law), majority of us think that's the way and expect HIGH to LOW allocation if you have multiple interest rates on your CC balance. If we are not aware of it, we may never be able to paid up the high interest portion unless we pay ALL remaining balance in FULL. And until we close it, we may end up paying 20%+ for some portion of it.

A friendly warning to all.
[OP]
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whodaphucru wrote:
Apr 5th, 2012 4:41 pm
Regarding profitability, are you suggesting that banks shouldn't make money? I don't have a problem with companies making money, if you don't like the amount of profitability or feel they are not being fair there is always the option to not use their services. Having strong profitable banks was a key part of why our financial system was not stressed the same way as US and European banks. A stable financial system is a pretty important thing.

I am not questioning whether banks should not make money. FYI...I'm all for for profit companies, including banks, as I still think profit is good motive and capitalism, with my all reservations, is better in this era compared to other economic systems. My concern and warning is about the payment allocation practices of some financial institutions and WE ARE NOT AWARE of it. If anyone has long term low/reasonable rate balance/loan, be careful when they offer some promotional rate, sometime better than long term loan/balance interest. We may end up paying 20%+ for some part of balance as they will not allocate payment to HIGH interest portion first, and we cannot close high interest part unless we pay them ALL.
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Dec 26, 2018
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This is a policy I think will increase abuse in the bank
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