Get $200 Free from TD Canada Trust

TD Canada Trust have just introduced their "Simply Save" program. This program is a lot like Scotiabank's "Bank The Rest" program, which is really designed to just trigger more overdraft protection service fees on their poorest customers. You can read my previous blog entry on that if you like. In a nutshell, every time you use your atm card, be it for cash withdrawal or debit purchases, you can designate an amount of money to be transferred into a savings account. So it is just an automatic way to transfer money out of your chequing account and into a restrictive savings account with high fees. Such a savings account typically allows one free withdrawal per month, with a $10 fee for any subsequent withdrawals. So be careful if you have such a savings account, read the fine print.

For a limited time (to July 24, 2009), if you sign up for this program, TD will give you $10 (up to a maximum of $200) over the next year, for every $100 you manage to transfer to yourself. If you set up the plan to transfer the plan maximum of $5 every time you use your card, then it will take 20 transactions to save $100. So that's 20 transactions for the bank to give you a free $10, or in other words, the bank will pay you 50 cents every time you use your card for the next year. That's pretty darn sweet. So essentially if you shuffle $2K to yourself using 400 transactions next year, the bank gives you $200. To put it in perspective, you'd have to have a $10,000 GIC at 2% for a year to make $200. It's like the bank is setting aside 10 grand for you.

Don't forget to pull your savings out once a month and transfer them to some CDIC insured bank such as Canadian Tire Financial Services who will actually pay you some decent interest on the money. This will minimize the opportunity cost of your $2K used in the scheme.

Car Insurance Liability Coverage - Do you Have Enough?

If you're a car owner, I'd like you to take a look at your liability coverage on your insurance policy. Is it only a paltry $500K, or is it $1 million or hopefully higher? A lot of car owners just blindly keep renewing their policies year after year without considering how much actual liability coverage they have. In my opinion, $1 million is no longer enough and you should really be taking it up to $2 million, which will cost you around $20 per year more than the $1 million level. This is even more important if you occasionally drive into the USA, since our dollar has fallen to about the 80 cent level.

Deflation "Grows" Your Existing Debt

In a recent column in the Globe and Mail, Avner Mandelman points out that we're likely in deflationary times. In normal times of inflation, money slowly loses its value as it gets diluted. If you're in a negative monetary position ie. carrying debt, inflation will slowly make the debt less and less significant while your wages likely rise as well. During deflation, the opposite occurs. Your debt becomes more and more significant as your wages likely sit flat or possibly decline. On top of all that, the stuff you bought with the borrowed money is likely to be dropping in value too, faster than just the usual depreciation. I'm a big proponent of retiring your personal debt quickly, but in times of deflation I can't emphasize this enough.

Christmas Gift Cards - Be Careful!!!

We're now coming into the Christmas gift-giving season, and gift cards tend to be very popular. Stores love them since they get cash in advance, and overall the full value purchased on them tends not to be completely redeemed. They get lost, set aside and forgotten, or damaged leaving behind stored value that simply never gets spent. Due to there being no simple way to tell how much money is left on them, they get set aside. Always keep the last register receipt with your gift card, else it's like having store specific cash that has all the ink faded off except for the serial numbers. Some stores do have websites that let you check the money remaining on the card, but who wants to have to go running to the web to find out that there's $0.50 left on a card?

Next year, 2009, is not looking very good for retail, so store closings and bankruptcies are likely to be quite common. Don't be left holding useless gift cards, and I also don't recommend giving gift cards that are likely to become worthless. Assume that any gift card is not going to be redeemed in one fell swoop, and that your "giftee" is going to take six months or more to spend it down. In light of this, only buy gift cards from solid businesses that are highly likely to be around through 2009.

Finding Secure Money Mattresses

In these turbulent financial times, cash is king. Even gold doesn't seem to be doing all that well. So in this brief post, I'd like to just take a look at where one can securely park their money.

Money market funds, traditionally, have been great places to park your cash. They have generally paid pretty good rates of interest. But just how secure are they? They are not covered by CDIC insurance, and do you really know what paper is held by them? I'm going to define a secure money "mattress" as a place to park cash where the interest rates are top notch, and where this cash is insured. So just where are these mattresses? I'm listing the top three that I'm aware of, in order of my perceived quality of the insurance backing them.

1. Pretty much any high paying Canadian bank account with CDIC insurance qualifies. The insurance covers you up to $100,000 per depositor per bank. An RRSP account qualifies separately and so does a joint account. The downside is that if you have a lot more than $100K in cash to protect, you are having to open accounts at more than one bank, spreading around your $100K amounts. Such high interest accounts are ING Direct, President's Choice Financial's Interest Plus, ICICI Bank, and HSBC Direct. Do your homework though, some of these banks are easier to deal with than others.
2. CIPF Insurance covers investment brokers. If an investment broker goes bankrupt, your cash on hand with them is covered up to $1 million. But can you find a broker in Canada that will pay you more than a laughable rate on idle cash? I'm aware of only one right now, Etrade Canada with their new cash optimizer account. I believe that this is CIPF insured up to $1 million and they pay slightly better than ING Direct right now. This can save you having to maintain multiple $100K accounts at different banks. But it is still prudent not to have everything in one pot anyway. However, as always, do your own due diligence here and don't rely on what some guy has typed in his blog. Yes, even me. ;)
3. Manitoba Credit Unions. I'm not sure what the rules exactly are for opening accounts in Manitoba, but their credit union bank accounts are insured to unlimited amounts even for non-residents. Such credit unions are Achieva Financial and Outlook Financial. They will typically service charge the hell out of you unless you just use the accounts as mattresses and don't transact on them. But they pay really high rates of interest. Do lots of your own due diligence here.

My Idea Became a Billion Dollar ($945 million) Company

Back in 1999, three Nortel employees, namely myself, Claude Bouffard, and John Shannon were enjoying beers after work at the Royal Oak pub in Kanata, Ontario. We bantered about some ideas around micropayments on the internet. Why couldn't we pay small amounts of money, such as 25 cents for the newspaper, and have it just show up on our phone bill? We worked in the DMS division of Nortel and had some idea of how the billing system worked. After all, telcos have very well established billing systems for handling tiny line items, and they have an established system for reconciling these amounts amongst themselves. So the idea was essentially that you'd click on a link, a secure transaction box would pop up and prompt you for your "Go Pin". Well, the name Go Pin would come later but it serves to help you understand how it would work. The 25 cents or whatever it was would simply show up on your phone bill.

Our VP at the time, Bob Tipple, was convinced enough by John and Claude to allow Claude to run full-time with the idea. Claude being the infectious ball of energy that he is, drove the idea forward to the point where it had enough legs for the internal incubator folks to take the whole idea seriously. John and Claude sold it to the incubator folks, I was occasionally cheerleading from the technology side. Nortel created the business as GoPin Inc, and venture capitalists were found, and finally a CEO, Gary Marino, from the banking industry in the US came on board to lead. The company underwent a number of name changes, to Pinmoney then I4Commerce, then BillMeLater and it moved to Baltimore. Also, as you likely already figured out by now, the original idea morphed into BML doing realtime credit checks and handling the billing, as opposed to trying to herd the cats we like to call telcos.

Ironically the company sold for $945 million, more than Nortel's total market capitalization today. What did I get? Well, I do have a nice mug, a great story, a sense of pride, and I'm a little older and a bit wiser now. Maybe it's time to try another idea, but this time actually get some money out of it. I do not know how Nortel itself fared, they likely cashed out to a VC early.

Update: This has been picked up by the mainstream media, I have made the front page of the Ottawa Citizen today (Oct. 9). Why does everyone have to misspell my last name?

Don't Catch a Falling Knife

Today I would simply like to say that one should wait until the stock market stabilizes and begins a sustained upwards trend before you decide to buy in. While you may look at those low stock prices and start to salivate, please hold off, unless of course you prefer to just roll the dice with wild abandon, or have gambling money you want to spend now. By holding off, you might not end up buying the absolute bottom, but don't be greedy, have some prudence in these times of uncertainty. If you prefer, buy in on a regular basis over time (dollar cost averaging), that's a better idea than trying to grab at some of these falling knives.