Be Careful What You Wish For!


4 minute read

December 2, 2008

As the credit markets tighten across North America and conceivably the rest of the entire world, the effect can be felt by everybody from the largest corporations to the smallest Joe Q. Public’s.

Call me cynical, but when I get a letter from my bank, I just assume they are trying to screw me.

I’d like to analyze a few of the recent “offers” I have received…


When I finished my Bachelor of Commerce at McMaster University and immediately began the courses for my real estate license, I worked part time at TD Bank for the necessary “beer money.”

I remember marvelling at how many of their employees had drank the proverbial kool-aid and how they were so gung-ho on towing the company line, slaving for the man, and keeping the gleaming smiles on their faces.

At every bank meeting when the management announced the “new and exciting changes,” I felt like I was the only one in the room who was looking at these changes from a consumer’s perspective.

Remember when you didn’t have to PAY service charges to take your own money out of your own account?

I certainly don’t; that’s how long it’s been.

I remember announcing one day, “All banks screw people.  That’s the business model; they’ve been doing it since the 16th century!”  Suffice it to say, that did not go over well with management…

Two days ago I received a letter from my bank, and on the envelope it read “GOOD NEWS INSIDE!”

I immediately assumed I was being screwed, conned, or both.

Here is what the letter said:

As a TD Canada Trust Line of Credit customer, you already enjoy a high level of convenience and flexibility when it comes to using your personal line of credit.  Now you can enjoy a new level of flexibility when it comes to making payments to your line of credit.

Okay, so what they’ve done here is introduced their letter by talking about how lucky we are to be a part of their business.  Words such as “convenience,” and “flexibility” jump out at us, and are amplified by the word “enjoy.”

Is “enjoy” really something anybody would associate with banking?  Or how about applying “enjoy” to the subjects of paying bills or anything to do with credit?

Reading crap like this makes me realize I would have really enjoyed working in marketing

So the meat & potatoes of the “good news” is as follows:

You can now choose to make “interest only” payments on your monthly balance – this would be a reduction from the previous minimum payment of 3% of your outstanding balance.  All you have to pay in any given month is the accrued and unpaid interest for the last monthly billing period as shown on your monthly statement!

Oh Lord!

I have written may articles in the past few months about the credit markets, more specifically the problems encountered by the United States and their sub-prime mortgage meltdown.  I’ve talked about things such as the elimination of 40-year amortizations in Canada, and debated the pros and cons of various financing packages and of course the institutions that offer them.

But this newest piece of “good news” from TD Canada Trust is a joke.

They’re just contributing to the problem that exists in our financial markets right now.  But not just the problem itself – they’re contributing to the root of the problem: it’s too easy for people to get money, who shouldn’t be getting money!

This newest piece of “good news” is basically helping people to get themselves into debt that they can never get out of.

I have never carried a balance on a credit card.  Ever.

I know people do this, and their reasons for doing so vary.  But why does nobody at the bank ever explain to you that even if you MUST carry a balance on your credit card which has 31% interest, you can always get a line of credit at 6.75% and use it to pay off your balance?

Because, as an outspoken young man once said in front of the entire management team, “All banks screw people.”

So back to the issue at hand: the interest-only payments on TD Canada Trust’s line of credit.

What this essentially means is that by paying the interest only, you never actually pay down any of the principal.  You presumably continue to borrow more from your line of credit, but you never pay it down.

This is what the bank is hoping for.

To quote my favorite movie, Maxed Out, “Ideally, the only form of debt discharge in the eyes of lending institutions is death.”  (Click Here for my review of this movie, or Click Here for the page at

The letter from TD Canada Trust actually gives an example of how the new “good news” works.

By borrowing $5,000 at 6.75% interest, your monthly interest portion would be $28.13.  Under the old system where the borrower had to pay back the “minimum” of 3% of the principal, the minimum monthly payment would be $150.00.

Under the new system of “interest only,” the borrower is responsible for that $28.13 portion, and nothing more.

They go on to show the $121.87 difference in BOLD!

Here’s an idea: if you really can’t afford to come up with more than $28.13 per month, maybe you shouldn’t be borrowing $5,000!  Yes, I understand that some borrowers are using the money for small-business start-ups or other worthy causes, but many of them just want the money because it’s available.

This is the root cause of the current financial turmoil that plagues our economy, in my opinion.

People who can’t afford houses were given money to purchase them in the United States.

People who can’t afford to borrow money for personal consumption have financial institutions lined up to give them money across the globe.

Perhaps the root cause of this root cause is that people in today’s society have a need for more, more, and more.

Bigger, shinier cars!  Flashier, brand name clothing!  Bottle service at nightclubs!  Renovating and “updating” a fully-functional kitchen!  NewER, bettER, fastER!

And they borrow money to do it.

The banks don’t care – it’s not their job to police the economy.

But when the banks are about to go bankrupt, then it becomes the taxpayers’ job to bail them out.

Thankfully, the banks in Canada and the United States are different, and as per the buzz last month, we know that Canada has the most sound banking system in the world.

Nevertheless, it doesn’t stop them from trying to screw the naive and unsuspecting.

Nope.  No matter what the state of the economy, that will never go away…

Written By David Fleming

David Fleming is the author of Toronto Realty Blog, founded in 2007. He combined his passion for writing and real estate to create a space for honest information and two-way communication in a complex and dynamic market. David is a licensed Broker and the Broker of Record for Bosley – Toronto Realty Group

Find Out More About David Read More Posts

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  1. Krupo

    at 12:56 am

    Even better is other free unsolicited offers in the mail which, when you tell your banking friends about, makes them go “that’s illegal.”


    “Well if it’s not, it should be.”


  2. Oakvillian

    at 3:27 pm

    Indeed. the lure of easy credit. What gets me is the “points” you earn–the unsavvy–or even the lazy–consumer may have money in the bank but use credit instead of Interac “to get the points.”

    In my case, after three years of significant credit cards pending (all groceries, travel, cell phone bill, etc.), I got maybe a hundred-dollar voucher at the Bay…Pencil in five or six “interest only” payments in that time, and that is easily wiped out.

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