Spending

One Reason to Obtain a US Dollar Credit Card

August 8, 2010

38 comments

Frequent travelers to the US or those who incur regular expenses in US dollars might want to sign up for an US Dollar credit card. It might work out cheaper to convert Canadian dollars into US dollars using this gambit than paying a 2.5% premium that credit cards typically charge for currency conversions. Reader Andrew sent in this note on why a US Dollar credit card makes sense.

I do a fair amount of traveling in the US, and therefore follow closely the mechanisms by which my credit card converts exchange from US dollars to Canadian dollars. This exchange is typically done by Visa at what they say is a a 2.5 percent premium on the prevailing exchange rate “at the time of posting”.

Now, I first became intrigued with exactly what time point Visa would use to make the exchange back in 2007, when the Canadian dollar approached $1.10 (US).

I had the good fortune to be traveling in the States at that time, using my card several times each day. Interestingly, when I returned home to my credit card statement, my quoted exchange never even got close to $1.10, even when accounting for the 2.5 percent premium on exchange.

As the currency exchange rate had been highly volatile at that time, it occurred to me that if Visa could select the time of conversion retrospectively, they could potentially squeeze an extra 1 to 2 percent out of the exchange business at my expense.

However, when I examined the Cardholder Agreement at that time, it stated that the conversion would be made at the prevailing exchange rate at the time of posting to the account. This obligation seemed to limit the ability of the bank to ‘choose’ a moment of exchange.

I recently reexamined the latest cardholder agreement, and lo and behold, the wording on foreign transactions has changed!

“Foreign Currency Transactions:
… we will convert the charges into Canadian dollars no later than the date we post the transaction to your Visa Account at our exchange rate which is 2.5% over a benchmark rate set by Visa International…”

I read this new description in the cardholder agreement, as allowing the bank the flexibility, as long as it is same day, to choose the time of conversion in order to maximize exchange profits. They can exchange all US$ transactions at the day low point for the CA$, and use the day high point for CA$ transactions on US cards.

For anyone sitting on the fence about getting a US$ billed credit card, this may be enough to convince them to go for it!

Useful Used Car Pricing Resources

July 12, 2010

21 comments

Son: Nice car Dad. How much did you pay for it?
Dad: Ten thousand dollars.
Son: I think that’s too much.
Dad: Really? How much do you think I should have paid?
Son: Four dollars.

There are only so many harsh Ottawa winters a car can take. A few months back, I took my 1992 Honda Accord to my mechanic who delivered the bad news: the car has roughly six months left before it will need significant repairs to keep it in running condition. So with a heavy heart, I turned in my old car to the Retire Your Ride program and went looking for a replacement. I wasn’t interested in getting a brand-new car — the initial depreciation hit is large and I live in a rather rough neighbourhood — young kids zipping around on bikes and if they can get away with it, climbing on cars. I started looking at private sales on Kijiji and Auto Trader but still turned to the trusty Canadian Red Book, which is available in most public libraries in the reference section, for guidance on pricing.

But there is an easier way. A website called VMR Canada provides an easy way to look up Canadian used car values for most makes, models and years. You can also refine the search by picking a trim, options such as leather seats and the number of clicks. I found the wholesale and retail values to be close to the Canadian Red Book for the various Honda Accords I looked at. Another useful pricing resource is the Black Book trade-in estimators available at many car manufacturer websites. Our 4-year old son obviously hadn’t checked out any of these sites, which probably explains why his estimate of car values is a bit on the low side.

Another Reason to love Costco

June 23, 2010

27 comments

Costco’s low prices are one reason we are big fans of the warehouse store. Their generous return policy is another reason why Costco is the first stop for our purchases. Over the years Costco has tightened up their return policy somewhat — now, shoppers have just 90 days to return electronics goods such as televisions, computers and digital cameras but their return policy on other merchandise remains very generous.

Last year, I had purchased a pressure washer at Costco and ended up using it around the house less than a dozen times. Over the weekend, I found that the water inlet into the pressure washer was broken. The manufacturer offers a 1-year limited warranty but I did not keep the original receipt or register the product and in any case “limited” likely means a long list of exclusions buried in the fine print.

I thought it is worth a try to put the washer into the original packaging, take it to my local Costco, explain that it is broken and ask if they’ll provide me with a refund. I wasn’t very hopeful considering that (a) I did not have the receipt and (b) it was almost certainly more than a year since I purchased it. To my enormous surprise, Costco took the washer back and provided a full refund even though it turned out that it was purchased 15 months back.

It is a rare business that tries hard to provide customer satisfaction these days. You can find so many instances of businesses trying to hide behind the fine print on Ellen Roseman’s blog. But, generous return policies may not be just altruism on Costco’s part. After all, a satisfied customer is more likely to stay loyal and put in a good word for you. Being nice to customers is just good business.