Credit Cards » Credit Card News » Canadians Looking to New Credit Card Rules, Too
Date April 25, 2009

Canadians Looking to New Credit Card Rules, Too

Americans aren’t the only ones dealing with credit card problems. While President Obama met with executives from flagscard issuers including American Express Co. and Bank of America Corp. to review credit-card policies for fees and interest rate limits, the Canadian government Prime Minister Stephen Harper is responding to consumer groups and lawmakers who insist the banks should have lower rates, and more information for consumers for understanding how the credit cards work. Namely, consumers should know clearly what their interest rates are, and not be faced with interest rate increases for unknown reasons.

Finance Minister Jim Flaherty, will announce new rules for credit cards next week that will include regulations for issues that are unfair to consumers. Some of these changes will include a required 21 day grace period for all credit cards, which means that if the payment is sent within the 21 day window there is no interest accumulated. Currently, grace periods vary from one bank to the next. Banks and credit card companies will need to indicate clear interest rate change information – so that they’re unable to simply increase credit limits whenever they want.

“We have to make sure the system operates fairly, and everybody knows the rules,” Jim Flaherty said during an interview with Washington.

The Bank of Canada cut the overnight rate to a record low of .25% earlier this week, but most banks are charging almost 20% interest on unpaid bills which isn’t giving cardholders much needed relief from the interest-rate cuts.

Canadians, just like Americans, are living off credit cards more frequently than ever before. The neighbors to the north are also experiencing record numbers of people losing their jobs, and will be facing huge credit problems if the trends continue. Canadian bank credit card balances have increased from $41 billion from August of 2008 to $49.9 billion currently – which is an increase of almost 40% in a year’s time, according to a report by Deloitte.

According to Moody’s Investors Service, credit card losses rose to 3.1 percent of the average balances in the third quarter, which is the 7th consecutive period of increases. While still training the United States card losses of 6.6% of balances, the number is still too high.

Up to three parliamentary committees in Ottawa may be holding hearings on credit card and bank issues, with the committee reports being watched closely by Flaherty to determine whether additional governmental regulations will be needed.

Date April 10, 2009

Visa Introduces a Cellphone System To Pay With Credit

In Malaysia, Visa has introduced a cellphone payment system that uses a chip in a cell phone to communicate the visa-cell payment transaction with the merchant terminal. Japan currently uses a similar phone payment scheme, and it is expected that this technology will be rolled out into other countries in coming years.

Here’s how Malaysia credit card buyers use their cell phones to make payments:

  • They buy a phone having the special field communication chip in it (like the Nokia 6212).
  • They connect the phone with their bank via the mobile Internet to set up the payment account.
  • When they’re ready to pay for something, they wave their phone within 4 cm of the merchant terminal, which is exactly like swiping the magnetic strip of a credit card through a terminal.

Currently, the United States has a similar payment system used in a handful of retail establishments which uses an R.F.I.D system. Think about Mobile SpeedPass – where you could flash your special keychain at the gas pump and automatically pay for your gas. This system creates tags in credit cards or for keychains, so instead of swiping the credit card through the terminal itself, you simply wave the tag or keychain to make the payment. The use of the R.F.I.D system is not very widespread yet, as there are concerns over unintentional purchases – for example, what happens if you walk by a terminal but did not make a purchase? It’s possible you could be paying for the person who is currently checking out.

The cell phone equivalent being used in Malaysia offers password encryption for the payment capabilities within the cell phone. That way, if a thief runs off with your phone, they can’t also go on a spending spree using your phone.

The system is currently expanding to make it possible for the phones to handle multiple payment accounts – so users could pay for their parking and public transit through one payment account, their groceries on another. Additionally, these phones will soon make it possible to allow both credit and debit transactions to take place through the phones, simply by selecting which account to use when you pay using the phone.

What is the purpose of using phones for payment instead of credit cards? Visa is hoping to appeal to individuals who have their phones accessible at all times, and therefore find it easier and quicker to pull out their phone at the retailer checkout line rather than finding their credit card in their wallet.

In the United States, Visa is currently testing various ways of enhancing credit cards by using text messaging services and coupons for Visa merchants. For Android smartphone users, they can receive coupons on their phone for retailers near their current location right on their phones – and there are plans to roll out the coupon system to other smartphones in the near future.