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Canadian Tire tells wife of ailing customer to pay his $18,000 debt, despite credit card insurance

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Almost 30 years ago, George Graves signed up for a Mastercard at his local Canadian Tire store. He was also sold insurance on that credit card, designed to help with payments in the event a cardholder loses their job, becomes disabled or gets sick.

“My husband paid for Credit Protector insurance all these years in case something bad should happen,” says his 72-year old wife, Jolante Graves.

“Now it’s happened, and the company doesn’t want to live up to … expectations.”

George Graves suffered a stroke in February and was diagnosed with vascular dementia. (Submitted by Jolante Graves)

George Graves, 84, a farrier from Addison, Ont., had a stroke in February that put him in long-term care and quickly led to vascular dementia.

“I thought we’d be OK because of his credit card insurance,” his wife told Go Public.

It’s estimated that millions of Canadians pay for insurance on their credit cards.

But financial experts say the product is pricey, carries numerous conditions to qualify for coverage and often doesn’t pay out. In many cases, the insurance will only cover the minimum monthly payment — not the entire balance.

“Credit card protection is fantastic for the banker, usually horrible for the consumer,” says personal finance expert Kerry Taylor, from Vernon, B.C.

In the months following her husband’s stroke, Jolante Graves says he became unable to recognize her and couldn’t read or write.

She says employees from Canadian Tire Bank repeatedly phoned her at home, demanding she pay her spouse’s outstanding credit card bill, which was about $17,000. She had not co-signed for the credit card, and had no obligation to pay it off.

“They have been evasive, rude and unkind,” Graves wrote in an email to Go Public. “This is causing me a lot of distress.”

Graves says she told them her husband had dementia, and was unable to file a claim on his own, but because the policy was in her husband’s name, she was told by bank officials that they could only deal with him.

In July, a letter arrived from Canadian Tire Bank, saying her husband’s overdue account was being “escalated to our Credit Recoveries Department,” and demanded immediate payment.

George Graves died four weeks ago.

Canadian Tire settles

Two days after Go Public contacted Canadian Tire Bank, a spokesperson phoned Jolante Graves and apologized for the harassing phone calls.

He also said that although her husband would have to make the insurance claim, he was willing to erase the debt — which had grown to over $18,000 — if she agreed to keep the deal confidential. 

She signed a confidentiality agreement, but CBC had already interviewed her.

Canadian Tire turned down a Go Public request for an interview, and instead emailed a statement, saying, “We take any concern raised by our customers seriously and in this particular case, we were able to quickly resolve the matter.”

Watch CBC‘s investigative consumer programMarketplace (8 p.m. Friday on CBC-TV) as they take hidden cameras into the big banks to reveal how customers get pitched credit card balance protection insurance.

Go Public asked how much George Graves had paid in credit card insurance over the years — a recent Mastercard statement from Canadian Tire Bank showed that he was paying about $105 a month for insurance.

A bank spokesperson declined to say how much Graves had paid in premiums “for privacy reasons,” but in a letter to Jolante Graves, a senior representative wrote, “the amount of creditor insurance premiums paid was far less than the amount of debt that Canadian Tire Bank has forgiven.”

He also wrote that Canadian Tire “has processes in place” to make customers “aware of how their credit protection insurance coverage could apply” and that these processes were followed.

Coverage ‘extremely narrow’

Taylor has examined the fine print on insurance contracts for a number of credit cards, and says she’d never buy such a product.

“It generally doesn’t help the consumer,” says Taylor. “It’s just an expensive product that they’re adding to their debt load and the premiums are extremely high.”

Canadian Tire charges $1.10 per $100 balance a month for its Credit Protector product (which decreases to 59 cents per $100 when the cardholder turns 80). That means that the average customer with a monthly balance of $2,500, who doesn’t get the discount, pays $27.50 a month for insurance, or $330 a year, plus taxes.

Personal finance expert Kerry Taylor says people are better off getting good life and disability insurance, instead of paying for pricey credit card balance protection. (Gary Moore/CBC)

Taylor says what policies actually cover is “extremely narrow.”

Often people who buy credit card protection think they have unemployment coverage, but learn they don’t qualify because many insurance companies require the cardholder to be working for one employer for a minimum of 25 hours a week.

“If you’re someone like me in the gig economy, I’m not going to be covered, because I have multiple jobs and none of them add up to 25 hours a week,” says Taylor.

George Graves did not qualify for unemployment coverage through his credit card insurance because as a farrier, he did not have one employer for 25 hours a week. (Submitted by Jolante Graves)

George Graves didn’t qualify for unemployment coverage.

He was still working as a farrier, shaping and fitting horses with shoes, when he was sold the insurance on his credit card, but he didn’t have one employer for 25 hours a week.

His wife also couldn’t collect on the life insurance included in the coverage, because that stops paying out at age 80.

“With a standard life insurance or disability policy, someone is going to ask you questions about your health, your age, your gender, what kind of work you do and so on,” says Taylor.

“It’s all on paper, so they can figure out what your risk is for making a claim, and charge the correct premium. That underwriting doesn’t exist with credit card insurance.”

Taylor says people get better protection if they pay for life and disability insurance.

“Get the underwriting,” she says, “so you know if your illness will be covered or not.”

She also recommends people create their own emergency fund.

“That way, if you get sick or injured, you can cover your minimum monthly payments yourself,” says Taylor. 

‘People don’t understand how it works’

“A credit card is a high interest product, initially meant for safety and convenience,” says Scott Hannah, president of the Credit Counselling Society. “They’re not designed to carry a long-term balance, that’s the problem.”

Scott Hannah of the Credit Counselling Society says people with crippling credit card debt often cut up their cards when they come in for debt counselling. (Dillon Hodgin/CBC)

He says counsellors at his office often hear from people who get into credit card debt and are surprised to learn the insurance they’ve been paying for doesn’t cover them.

“It’s not until they hit financial trouble that they find out they never qualified to begin with,” says Hannah, noting that many consumers don’t read the fine print before they sign up for credit card protection plans.

‘He would be devastated’

George Graves died unaware of the controversy that surrounded his outstanding credit card debt.

“I’m glad he never knew,” says his wife. “He would be devastated. He bought that insurance for peace of mind.”

She’s glad Canadian Tire settled the dispute over her husband’s Mastercard, but says the retailer has lost her as a customer.

“They will never see me set foot in their blasted store again,” says Graves. “If I want to buy something, I’ll go somewhere else.”

— With files from Enza Uda

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Real Estate

5 ways to reduce your mortgage amortization

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Since the pandemic hit, a lot of Canadians have been affected financially and if you’re on a mortgage, reducing your amortization period can be of great help.

A mortgage amortization period is the amount of time it would take a homeowner to completely pay off their mortgage. The amortization is typically an estimate based on what the interest rate for your current term is. Calculating your amortization is done easily using a loan amortization calculator which shows you the different payment schedules within your amortization period.

 In Canada, if you made a down payment that is less than the recommended 20 per cent of the total cost of your home, then the longest amortization period you’re allowed to have is 25 years. The mortgage amortization period not only affects the length of time it would take to completely repay the loan, but also the amount of interest paid over the lifecycle of the mortgage.

Typically, longer amortization periods involve making smaller monthly payments and having a much higher total interest cost over the duration of the mortgage. While on the other hand, shorter amortization periods entails making larger monthly payments and having lower total interest costs.

It’s the dream of every homeowner to become mortgage-free. A general rule of thumb would be to try and keep your monthly mortgage costs as low as possible—preferably below 30 per cent of your monthly income. Over time, you may become more financially stable by either getting a tax return, a bonus or an additional source of income and want to channel that towards your principal.

There are several ways to keep your monthly mortgage payments low and reduce your amortization. Here are a few ways to achieve that goal:

1. Make a larger down payment

Once you’ve decided to buy a home, always consider putting asides some significant amount of money that would act as a down payment to reduce your monthly mortgage. While the recommended amount to put aside as a down payment is 20 per cent,  if you aren’t in a hurry to purchase the property or are more financial buoyant, you can even pay more.

Essentially, the larger your down payment, the lower your mortgage would be as it means you’re borrowing less money from your lender. However, if you pay at least 20 per cent upfront, there would be no need for you to cover the additional cost of private mortgage insurance which would save you some money.

2. Make bi-weekly payments

Most homeowners make monthly payments which amount to 12 payments every year. But if your bank or lender offers the option of accelerated bi-weekly payment, you will be making an equivalent of one more payment annually. Doing this will further reduce your amortization period by allowing you to pay off your mortgage much faster.

3. Have a fixed renewal payment

It is normal for lenders to offer discounts on interest rate during your amortization period. However, as you continuously renew your mortgage at a lower rate, always keep a fixed repayment sum.

Rather than just making lower payments, you can keep your payments static, since the more money applied to your principal, the faster you can clear your mortgage.

4. Increase your payment amount

Many mortgages give homeowners the option to increase their payment amount at least once a year. Now, this is very ideal for those who have the financial capacity to do so because the extra money would be added to your principal.

Irrespective of how small the increase might be, in the long run, it would make a huge difference. For example, if your monthly mortgage payment is about $2,752 per month. It would be in your best interest to round it up to $2,800 every month. That way, you are much closer to reducing your mortgage amortization period.

5. Leverage on prepayment privileges

The ability for homeowners to make any form of prepayment solely depends on what mortgage features are provided by their lender.

With an open mortgage, you can easily make additional payments at any given time. However, if you have a closed mortgage—which makes up the larger percentage of existing mortgages—you will need to check if you have the option of prepayments which would allow you to make extra lump sum payments.

Additionally, there may also be the option to make extra lump sum payments at the end of your existing mortgage term before its time for renewal.

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Real Estate

Mortgage insurance vs. life insurance: What you need to know

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Your home is likely the biggest asset you’ll ever own. So how can you protect it in case something were to happen to you? To start, homeowners have a few options to choose from. You can either:

  • ensure you have mortgage protection with a life insurance policy from an insurance company or
  • get mortgage insurance from a bank or mortgage lender.

Mortgage insurance vs. life insurance: How do they each work?  

The first thing to know is that life insurance can be a great way to make sure you and your family have mortgage protection.

The money from a life insurance policy usually goes right into the hands of your beneficiaries – not the bank or mortgage lender. Your beneficiaries are whoever you choose to receive the benefit or money from your policy after you die.

Life insurance policies, like term life insurance, come with a death benefit. A death benefit is the amount of money given to your beneficiaries after you die. The exact amount they’ll receive depends on the policy you buy.

With term life insurance, you’re covered for a set period, such as 10, 15, 20 or 30 years. The premium – that’s the monthly or annual fee you pay for insurance – is usually low for the first term.

If you die while you’re coved by your life insurance policy, your beneficiaries will receive a tax-free death benefit. They can then use this money to help pay off the mortgage or for any other reason. So not only is your mortgage protected, but your family will also have funds to cover other expenses that they relied on you to pay.

Mortgage insurance works by paying off the outstanding principal balance of your mortgage, up to a certain amount, if you die.

With mortgage insurance, the money goes directly to the bank or lender to pay off the mortgage – and that’s it. There’s no extra money to cover other expenses, and you don’t get to leave any cash behind to your beneficiaries.

What’s the difference between mortgage insurance and life insurance?

The main difference is that mortgage insurance covers only your outstanding mortgage balance. And, that money goes directly to the bank or mortgage lender, not your beneficiary. This means that there’s no cash, payout or benefit given to your beneficiary. 

With life insurance, however, you get mortgage protection and more. Here’s how it works: every life insurance policy provides a tax-free amount of money (the death benefit) to the beneficiary. The payment can cover more than just the mortgage. The beneficiary may then use the money for any purpose. For example, apart from paying off the mortgage, they can also use the funds from the death benefit to cover:

  • any of your remaining debts,
  • the cost of child care,
  • funeral costs,
  • the cost of child care, and
  • any other living expenses. 

But before you decide between life insurance and mortgage insurance, here are some other important differences to keep in mind:

Who gets the money?

With life insurance, the money goes to whomever you name as your beneficiary.

With mortgage insurance, the money goes entirely to the bank.

Can you move your policy?

With life insurance, your policy stays with you even if you transfer your mortgage to another company. There’s no need to re-apply or prove your health is good enough to be insured.

With mortgage insurance, however, your policy doesn’t automatically move with you if you change mortgage providers. If you move your mortgage to another bank, you’ll have to prove that your health is still good.

Which offers more flexibility, life insurance or mortgage insurance?

With life insurance, your beneficiaries have the flexibility to cover the mortgage balance and more after you die. As the policy owner, you can choose how much insurance coverage you want and how long you need it. And, the coverage doesn’t decline unless you want it to.

With mortgage insurance through a bank, you don’t have the flexibility to change your coverage. In this case, you’re only protecting the outstanding balance on your mortgage.

Do you need a medical exam to qualify? 

With a term life insurance policy from Sun Life, you may have to answer some medical questions or take a medical exam before you’re approved for coverage. Once you’re approved, Sun Life won’t ask for any additional medical information later on.

With mortgage insurance, a bank or mortgage lender may ask some medical questions when you apply. However, if you make a claim after you’re approved, your bank may ask for additional medical information.* At that point, they may discover some conditions that disqualify you from receiving payment on a claim.

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Real Estate

5 common mistakes Canadians make with their mortgages

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This article was created by MoneyWise. Postmedia and MoneyWise may earn an affiliate commission through links on this page.

Since COVID-19 dragged interest rates to historic lows last year, Canadians have been diving into the real estate market with unprecedented verve.

During a time of extraordinary financial disruption, more than 551,000 properties sold last year — a new annual record, according to the Canadian Real Estate Association. Those sales provided a desperately needed dose of oxygen for the country’s gasping economy.

Given the slew of new mortgages taken out in 2020, there were bound to be slip-ups. So, MoneyWise asked four of the country’s sharpest mortgage minds to share what they feel are the mistakes Canadians most frequently make when securing a home loan.

Mistake 1: Not having your documents ready

One of your mortgage broker’s primary functions is to provide lenders with paperwork confirming your income, assets, source of down payment and overall reliability as a borrower. Without complete and accurate documentation, no reputable lender will be able to process your loan.

But “borrowers often don’t have these documents on hand,” says John Vo of Spicer Vo Mortgages in Halifax, Nova Scotia. “And even when they do provide these documents, they may not be the correct documentation required.”

Some of the most frequent mistakes Vo sees when borrowers send in their paperwork include:

  • Not including a name or other relevant details on key pieces of information.
  • Providing old bank or pay statements instead of those dated within the last 30 days.
  • Sending only a partial document package. If a lender asks for six pages to support your loan, don’t send two. If you’re asked for four months’ worth of bank statements, don’t provide only one.
  • Thinking low-quality or blurry files sent by email or text will be good enough. Lenders need to be able to read what you send them.

If you send your broker an incomplete documents package, the result is inevitable: Your mortgage application will be delayed as long as it takes for you to find the required materials, and your house shopping could be sidetracked for months.

Mistake 2: Blinded by the rate

Ask any mortgage broker and they’ll tell you that the question they’re asked most frequently is: “What’s your lowest rate?”

The interest rate you’ll pay on your mortgage is a massive consideration, so comparing the rates lenders are offering is a good habit once you’ve slipped on your house-hunter hat.

Rates have been on the rise lately given government actions to stimulate the Canadian economy. You may want to lock a low rate now, so you can hold onto it for up to 120 days.

But Chris Kolinski, broker at Saskatoon, Saskatchewan-based iSask Mortgages, says too many borrowers get obsessed with finding the lowest rate and ignore the other aspects of a mortgage that can greatly impact its overall cost.

“I always ask my clients ‘Do you want to get the best rate, or do you want to save the most money?’ because those two things are not always synonymous,” Kolinski says. “That opens a conversation about needs and wants.”

Many of the rock-bottom interest rates on offer from Canadian lenders can be hard to qualify for, come with limited features, or cost borrowers “a ton” of money if they break their terms, Kolinski points out.

Mistake 3: Not reading the fine print

Dalia Barsoum of Streetwise Mortgages in Woodbridge, Ontario, shares a universal message: “Read the fine print. Understand what you’re signing up for.”

Most borrowers don’t expect they’ll ever break their mortgages, but data collected by TD Bank shows that 7 in 10 homeowners move on from their properties earlier than they expect.

It’s critical to understand your loan’s prepayment privileges and the rules around an early departure. “If you exit the mortgage, how much are you going to pay? It’s really, really important,” Barsoum says.

She has seen too borrowers come to her hoping to refinance a mortgage they received from a private or specialty lender, only to find that what they were attempting was impossible.

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