• 

  Usher Raymond IV Debit MasterCard

  The prepaid card’s $25 activation fee had users singing the blues.

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  Kardashian Prepaid MasterCard

  A $59.95 annual fee and $7.95 monthly fee led this card to being pulled.

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  Suze Orman Prepaid MasterCard

  Financial guru flogs $3 monthly fee card as credit alternative.

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  Justin Bieber Prepaid MasterCard

  With multiple fees this card isn’t as smart as the pop star would have you “beliebing.”

  Bieber and SpendSmart launched a video series in mid-April to promote the card:
  

1. Chasing points while you carry a balance. I’ve met people who are so enamoured with the points they get on their cards that they don’t give a second glance to the horrendous interest rate they’re paying on their balances. Credit cards with the most bells and whistles also tend to come with the highest interest rates. If you’re not paying your balance off in full, those points are costing you mega-bucks.

2. Not reading the fine print. The ads say you’ll earn 5% back, but there’s an asterisk. If you bother to look at the fine print you’ll see there’s a limit. Have you figured out how much you’ll have to spend on the card to cover the annual cost of having the card? How much money actually goes into your pocket before you hit your fine-print limit?

3. Getting trapped by instant discounts. You’re at the checkout with $500 worth of merchandise. The cashier says, “If you open credit card account with us today, you’ll save $50.” What’s not to like? Hey, if you’re going to carry a balance, the interest rate, for one thing. Or how about the fact that the credit card limit you’re offered will affect your other borrowing limits? Or the fact that another form of credit on your credit history may not be the best thing for your credit score? If the store can afford to knock 10% off the price of everything you just bought, you can bet your bottom dollar that it’s going to recoup it in interest and fees.

4. Failing to redeem. The points pile up. You plan to use them to travel, but the restrictions make it so inconvenient. Or you plan to redeem for groceries, but standing there holding up the line while your cashier (and all the other customers) glare at you for using the coupons makes you cringe. What’s the point of gathering all those points if you never turn them into cash? Use them up, and take the cash you would have spent and send it to your savings. Now you’re a winner!

Personal Finance

Even professional advisers can point to someone who helped them adopt good money habits. For Robert Abboud, a CFP with Raymond James, that person was his father. “My dad taught me about cash flow,” he says. “He carried a budget sheet with him wherever he went. He would always make sure that he wasn’t going over the monthly budget, and when it was time for a trip he always had money saved up. He only bought what he could afford. He taught me the greatest advice for financial planning is to live within your means.”

Michael Berton, a Vancouver-based CFP with Integrated Planning Group, lives by two simple, but crucial, pieces of advice. His first piece of advice is to spend less than you make. “It sounds simple, but many cannot do this,” he says. “Few measure their spending with relation to either their goals or after-tax income.”

His second piece of advice: pay yourself first. “That’s from David Chilton [author of The Wealthy Barber],” he says. “Set aside a portion automatically each month for the future. This can be in a regular investment account, RRSP, spousal RRSP, TFSA, or even in an RESP or RDSP.”

The best advice Cynthia Kett, a CFP with Stewart & Kett Financial Advisors, ever received opened her eyes to money management. It’s not what you earn, but what you keep, she says. “I sometimes compare cash flows and the building of net worth to the process of filling a bath with water,” she adds. “If you use the plug judiciously, you can allow some flow-through, but still fill the tub over time.”

Investing

Abboud’s best piece of investing guidance came from an experienced investment adviser who counseled him when he was just starting out. The advice: don’t get caught up in the hype around an investment. “Stay focused on well diversified, plain vanilla investments,” he says. “Forget about hot sectors and look more to a turtle versus the hare approach to investing—and be the turtle.”

Michael Schaab, a portfolio manager with Leith Wheeler Investment Counsel, has four key pieces of advice to add to that list. First, future rate of return is based on the price you pay for an investment. Next, investing is about making rational decisions when others are making emotional ones. Third, good companies get stronger in difficult times. “They gain customers, put poor competition out of business or buy competitors at discounted prices,” he says. And finally, take the “wallet test.” Ask yourself, “Do you trust management enough to leave your wallet in the room when you step out?”

Risk, of course, is another important thing investors need to pay attention to. This is an underlying current in the investment advice Michael Berton offers his clients. “Invest within your comfort of risk,” he says. “Successful investors stick to their investment plan. Ensure that you have an investment policy that will serve you and that you can be comfortable with in good and bad markets.”

Tax

Doug Carroll, vice-president of tax and estate planning at Invesco, makes a living hopping around the country to tell investors how they can reduce taxes, yet the best piece of advice he’s received is to “not sweat the taxes too much.” That might sound strange coming from a tax expert, but his point is that tax isn’t the only part of the equation.

“Each type of financial planning activity has its own focal point, with tax often being the next-in-line consideration,” he says. “For instance, savings vehicles follow from savings habits, investment tax profile complements investor risk profile, and overall income need for the long term should guide and coordinate the drawdown of income sources. Of course, tax can drain as much as half of one’s income, so it should definitely be factored into these and all other financial planning activities, informing decisions with the appropriate perspective and proportionality.”

Debt

Laurie Campbell has seen more than her fair share of people who are deep in debt. The CEO of Credit Canada Debt Solutions says people tend to make things needlessly complicated. If you don’t understand a financial product or aren’t sure how to save then ask for help. “If you still don’t understand it then get advice from someone else,” she says. “It’s that simple.”

She also recommends limiting yourself to one credit card. “People who get into debt often have multiple credit cards that are all maxed out. If you have more than one card, cut up all but one and pay them off,” she says.

Pat White, executive director with Credit Counselling Canada, agrees. She says if you can’t pay your credit card in full each month then it’s time to consider where you are financially and stop using credit. “Use your income as a limit for your expenses rather than viewing available credit as additional income,” she says.

Of course, some of the best advice is often the simplest. White says she still lives by the advice her mother gave her years ago: save early. It’s a lesson she’s passed on to her children who started their RRSPs in their early 20s.

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What’s the best piece of financial advice you’ve ever received? Tell us in the comments section below.

Most credit cards come with a grace period that’s somewhere around 21 days. But that only applies if you pay your balance in full. Leave so much as a one-dollar balance and you’ll be charged interest on all your purchases back to the day they were made or posted.

Low-interest cards are another carrot. But if you don’t make at least your minimum payment within 30 days of your due date, you’ll watch your rate sky-rocket. It can take eons to get that great rate back, if you ever do.

Payments aren’t always applied in the order of your purchases. While you may have bought those shoes before you took that cash advance, there are different rules for different types of transactions. You’ll have to get out your magnifying glass and read the mouse print to see how your card distributes your payments.

Promotional rates don’t last forever. As soon as the promotion period expires, your card will revert to its usually much higher rate. A 1.7% rate may look good now, but if you’re going to end up paying 24.99% later, that balance transfer may not be such a good idea. If you’re being offered a special rate, make sure you mark the expiry date on your calendar–and have the balance paid off–before the big guns come out.

Perhaps the biggest myth that will end up hurting you is the belief that your credit limit reflects what you can afford to spend. There is no co-relation between how much you can afford and how much the credit card company will offer you. Regardless of the limit you are given, it is up to you to spend only as much as you can afford to repay. And the best way to know that? Already have the money in the bank before you whip out your credit card to pay. Failing that, you’re revving up that chain saw without your safety gear on.