Tuesday, February 24, 2009

Scotiabank's MoneySlave

I've got a couple things to blog about tonight. I'll schedule the other post to go up tomorrow, assuming I get to it. [Edit: which I won't.]

Anyhoo, I was checking my credit card balance online and noticed that they had credited my account with the annual moneyback payment. Which is unusual, since the annual credit is supposed to happen in July. 'Taint annual if it happens every seven months!

Now, Scotiabank (or more formally, the Bank of Nova Scotia) doesn't have the best reputation in many parts of the world, nor had it with my mother. But my dad did his banking with Scotiabank, and started me up with an account when I was ten years old.

Since then, I, like my father, have gotten credit cards, investments, and RSPs through Scotiabank. I've got a MoneyMaster "High Interest" savings account. Hell, I've even applied for a job with the company, unsuccessfully, my conscience is glad to report. I've considered changing banks, but most banks charge you an arm and a leg to take money out of other banks' machines, and Scotiabank has pretty darn good branch and bank machine coverage in downtown Ottawa.

So not having had abysmal treatment by Scotiabank, I've stayed with them.

And I haven't minded the Moneyback VISA card either. Not many frills (which, frankly, is how I like things), no annual fee (as far as I knew, though apparently it was $8), and it gives you "money back".

Now, the "free money" concept is, obviously, not free. Whenever you make a purchase at a store with your credit card, the credit card company takes a fixed per-purchase fee (like $0.50 to $1) plus a variable "discount fee" off the price of the item (like 1% to 3%). So by simply using a credit card, you are driving costs up for the businesses you frequent. For this reason, I try to use cash or debit when making smaller purchases at local stores. I don't try too hard, but I try.

Since the bank is taking a few percent from each purchase, it is to their benefit to get you to spend more money with your card, especially if you're the type of person who doesn't earn them much money otherwise, through annual fees and exorbitant interest charges. To encourage you, they often offer various incentives, either in the form of points programs (like for cards associated with stores like Canadian Tire, Sears, or Loblaws) or with "Moneyback" type deals.

These "Moneyback" deals are structured so that the more you spend, the more you'll get back (PDF warning). In the case of the Scotiabank Moneyback VISA, they'll give you a mere 0.25% "back" on the first $1500 you spend in a year, 0.50% on the second $1500, and 1% on anything above that.

Every July, they cash you out for however much money you spent in the last year, the counter resets to $0, and you go back to earning 0.25% until you spend enough money to kick up to the next bracket. So when I paid a decent price on a new bed this past Boxing week, even though I could afford to pay cash, it benefited me to use my Moneyback card, in order to maximize my cash back rewards.

(Incidentally, Sears tried to sign me up for a Sears card when I bought the bed. The benefits they offered me were $10 credit, free delivery, and I could pay for the bed in April with zero interest. Seeing as $10 is nothing on the cost of a bed, I had the money to pay for it now, and I had a great friend with a minivan, "zero interest" was also an accurate description of my reaction to this offer.)

But once you get up to 1%, it's a sweet spot to stay in. You don't want to, say, have your counter set back to zero. Which is why I was annoyed by the cashback getting cleaned out in February. Only eight months into the year, and four months until the next reset, I was getting seriously jipped of my rightfully-earned dozen or so dollars of upcoming reward.

So I called up the bank. Oh what fun that always is.

They politely explained to me that my card was being discontinued, and that since "most people" would be switching to the new "Momentum VISA" card (which isn't even listed on their list of all Scotiabank VISA cards), they were taking the liberty of switching everybody over to this card which they would be sending me in March.

How nice of them to tell me this.

So apparently there was something on my November statement. I didn't have my November statement with me when I was on the phone, and even then this wasn't sufficient notice in my opinion. I check my statements online, and I only receive the paper statements as a backup. I later discovered that this notice was on the third page of that statement, after the list of purchases was long finished. I don't see why I never got any notice of this in the online message centre when I signed on to my online account.

Nevertheless, switching me over without my explicit permission was.not.cool.

So I asked them what was different about this Momentum card and why I was forced to change. Well, for one, the Moneyback card was being discontinued, she said. As for what was different, she started off by telling me that the interest rate went up from an insulting 18.59% to an obscene 19.99%, there was a $39 annual fee. Oh really?

The reward structure was also different. Instead of the ladder structure described earlier, the lady told me there would be "2% cash back on the first $25,000 if the vendor is in the VISA network" (I stopped her before she bothered telling me what happened after that threshold), otherwise 1%. I didn't get a decent explanation of what the hell the "VISA network" is. Not this.

"So a store that accepts VISA is in the VISA network, right?"

"No, they have to be registered..."

Yeah, right, whatever. So the rate is really 1% then.

One thing I discovered in this conversation was that whenever I didn't know how to respond with flustered indignation, I'd just remain silent and she would fill the silence by volunteering more information I wouldn't have even thought to ask about. Which is actually a tactic I learned about tonight (after the phone call) in this helpful YouTube video law lecture called Don't talk to cops.

I think this silent treatment was how I happened to learn that there's this thing called the "No-Fee Moneyback VISA" card. Like the Momentum VISA, the No-Fee Moneyback has the same higher interest rate (not a problem for me since I never spend what I don't have), it has the same insurance plan, and it has the same payback structure as the Moneyback card I currently have. It also--get this--doesn't have any fucking annual fee!

So I'm trying to figure out the logic of their decision. Here we have a card that is nearly identical to the one Scotiabank is discontinuing--it even is slightly better, in terms of fees--and one that costs more in annual fees, requires a new card to be issued and is called something different. And they decided that most people would choose the different one. And by "choose", they mean "the bank will tell you that they are doing this automatically, and they aren't going to tell you upfront about any alternative."

I even went through this very painstakingly with the CSR and followed it with "now you can see why I'm frustrated by this, right?" and she said yes, although I think that's just a habit for call centre people.

So I told her to sign me up for the no-fee card, and she let me in on the little secret that I could keep the card I already have. It's that similar. More flabbergastion flummoxed from my flanges.

It wasn't until after I hung up that I realized that the whole point I had called in the first place--being shortchanged by my Moneyback being cashed out too early--hadn't been dealt with at all! So I called back and spoke with a rep named Candice.

She wasn't nearly as helpful, nor, it seemed, as friendly. Without the backstory to help me out, I could tell I wouldn't have much luck.

It didn't help that she didn't seem to have a fuck of a clue of why I was upset about this, either. Apparently the new payout period ends in November, so I'll get about seven months, giving me two seven-month periods in a row, shortchanging me of five months of top-rate cash-backing. Are the banks really this desperate?

She said she couldn't do anything for me for money I hadn't "earned" yet, and to call back in November.

Thanks, Candice.

So now I'm at home and looking at my December 3 statement, and the notice saying how much fun I'll have with the Momentum VISA card.

And looking at the Momentum rates on paper, I thought it would actually be a better choice, and I created the table below [hand-coded, since Blogger doesn't seem to want to do tables... I have no idea what the table will look like when I hit "publish"] to prove it, only to realize that the old Moneyback card with the lower cashback rate on the first $3000 would still be better, due to the lower fees.

Amount spentCash back with
$8 Fee Moneyback
Cash back with
$0-$8 Annual Fee-$39 Annual Fee
$1500$3.75 @ 0.25%
-$4.25 total
$15 @ 1%
-$24 total
$2350$3.75 @ 0.25% +
$4.25 @ 0.50%
$0 total
$23.50 @ 1%
-$15.5 total
$3000$3.75 @ 0.25% +
$7.50 @ 0.50%
$3.25 total
$30 @ 1%
-$9 total
$3900$3.75 @ 0.25% +
$7.50 @ 0.50% +
$9 @ 1%
$11.25 total
$39 @ 1%
$0 total
Over $3900Above plus 1%Above plus 1%
Now, this doesn't include the fact that one apparently gets "A full 2% cash back on eligible Gas, Grocery, Recurring Payments and Drugstore purchases," since I have no clue what "eligible" is supposed to mean, nor did the first CSR, other than the fact that these companies have to be in the "VISA network". (See above link for "VISA network" for how helpful that information is)

It also doesn't include the fact that additional cards on the Momentum plan are an additional $15 each, nor does it include the fact that I am now on the No-Fee card, meaning that first column can increase by an $8 reward per year.

So in addition to forcing people into a higher interest rate, Scotiabank is conning its customers into accepting at least $19.25 ($11.25 + $8) in increased net annual charges--even more to those customers who spend under $3000 per year (or Moneyback period, which at this rate seems to be more like seven months).

And this kind of bullshit happens all the time. No matter how closely you look, there will always be finer print to overlook with the lovely bastards we call credit card companies.

- RG>


jason said...

I like the President's Choice (CIBC) Mastercard. No fees and they rebate 1% of all your purchases in PC Points, which you can spend at Hartman's or Loblaws. The key is that you can spend the points as soon as you get $20 worth; you don't have to wait until the end of the year.

Check out the RedFlagDeals article, Canadian No-fee Credit Card Rewards Programs go head to head!

EsotericWombat said...

I will say this for the rest of my life. Forget the lawyers. First, kill all the bankers.

XUP said...

Thank you so much for this. I initially signed up for the Scotiabank no-fee money back VISA, too and have recently been charged $8. I read all that stuff back in November about changing the pay-out date, but I don't remember reading anything about a $39 annual fee. So, if I don't do anything, I'm going to get this $39 Momentum card now? I guess I'd better give them a call and see about that no-fee card. That's the only one that makes sense for my purposes....Unbelievable, by the way

RealGrouchy said...

xup, I think you might be in the clear, but it would be good to double-check. AFAIK, the no-fee card is NOT being discontinued, but if you got charged eight bucks...

- RG>

Anonymous said...

- Cardholders were informed on their DEC statement about the upcoming change. The bank wouldn't include 3 pages if you weren't meant to actually read them.

- Momentum isn't listed on the website because it hasn't been launched yet. None of the banks post info on credit products that would be 'coming soon'.

- The bank doesn't need your permission to change your product. As long as you get the notice ahead of time (eg. on DEC statement) they can change products, or even interest rates. Your VISA card is property of the bank.

- You aren't 'forced' to change your card. Visit your branch and fill out a 'VISA switch request' - it takes about 5 minutes.

-18.59% is not insulting. Look at the rates sears charges, or amex when you miss a payment! If you're carrying a balance, perhaps you should look into a lower rate value visa - the interest saved will be much greater than your moneyback reward.

- "2% cashback on the first 25k if the vendor is in the visa network' is not correct. 1% on all purchases, and 2% on eligible gas, grocery, and drugstore is correct.

RealGrouchy said...

Candace, is that you? :P

- RG>

Christine said...

Thanks for posting this. Someone I know recently signed up for this card and probably doesn't even know about the upcoming changes. I hate Scotiabank! I even came upon your entry while googling up that bank's surprise hidden fees.

Anonymous said...

My latest statement included a 1 800 number to call if I wanted to discuss my options. They switched me to the no fee moneyback card immediately, no questions asked.

Anonymous said...

This happened to me too..and I don't want it!! I've tried to switch twice, and both times was told, I couldn't! I tried with VISA Centre, and with Scotibank!

The momentum card IS different. In the fact that it's actually a SMART card! Has a microprocessor in it. Don't know all the details about it...just that it's new technology for North America. Honestly, I don't like the idea that it can track where I am! That I can "use" it as an identity, even for places of work. Sounds like control to me!!

RealGrouchy said...

Anonymous 8september09 - I think you may be mixing technologies, and you're being paranoid. The chip in your card is being rolled out for all plastic methods of payment: debit cards, credit cards, etc. My regular Moneyback card was re-issued to me with the chip.

These require the card to be inserted into a device to read the chip through physical contact, in addition to the magnetic stripe on the back of the card. It's not an RFID wireless chip, as you seem to be thinking it is.

Therefore, they can't track you any more than they could before by where you swiped your card.

- RG>