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WILL OTHER CREDIT CARD FIRMS DO THE SAME?

By LINDA LEATHERDALE

Here's a surefire sign our economic woes are getting worse.

Amid a growing credit crunch that's crippling the world's financial system pushing bankruptcies and loan defaults ever higher, American Express is offering its U.S. clients US$300 to pay off their balances and close out their accounts.

A spokesperson for American Express Canada said no similar buyout plan is being considered in Canada, where credit card delinquency rates are on rise, but nowhere the level of the United States.

Still, some experts warn if more jobs are lost - a growing number of Canadian households, struggling with record household debt $1.3 trillion, will default on payments. And that could spark rescue plans similar to the AmEx plan, to get the most destitute wiped from the books.

Latest stats estimate Canadian families owe $70 billion in credit card debt, with an average of 4.1 cards in every wallet.  A credit card is considered in default when unpaid balances exceed 30 days.

American Express, considered the credit card company for the wealthy, at one time only charged an annual membership fee for the privilege of holding its card.  No interest was charged since cardholders were expected to clear off balances when they came due.

But, with the explosion of our borrow now, pay later world - AmEx too ventured into the riskier mid-tier market.

By year-end 2008, its fourth-quarter profit plunged 72% to US$238 million from $858 million a year ago.  Its profit for its U.S. Card Services division fell to $4 million from $7 million a year ago. AmEx announced it was taking a pre-tax charge of US$440 million to raise worldwide lending reserves to 100% of past-due loans and increase reserves related to its credit card portfolio.

"We are looking at different ways that we can manage credit risk based on the customer's overall credit profile," said an American Express spokesperson, who explained the offer of a US$300 pre-paid American Express card was sent to a select number of clients, who have until the end of February to pay off balances and close their accounts by March or April.

Capital One - one of the largest issuers of MasterCard and Visa -  is also feeling the crunch, with its share price down more than 70% as its default rate on U.S. credit cards jumped to 7.82% in January, while the rate for loans at least 30 days delinquent increased to 5.02%.

Capital One said its expects loan losses from U.S. cards to jump to 8.1% in the first quarter of 2009.

Meanwhile, Fitch Ratings reported late payments on U.S. credit cards topped record levels in January and defaults soared to just under all-time highs.

My advice has always been debt is out - cash is king. If you get an offer of cash to pay off a card and a close an account - do it.

Bottomline is the gouging continues with credit card companies hiking their rates of interest to make up for losses, with some charging 26% and higher on outstanding balances, even with the Bank of Canada rate at a record low of 1%.

Trust me:  You're not going to get 26% on your savings. Don't be a slave to the system.  Get debt free.

Gas gouging at its height:

By LINDA LEATHERDALE

The great gasoline rip-off hits new heights in Canada, with motorists paying at least 20 cents a litre too much at the pumps, after world oil prices crashed from a high of US$147 a barrel last July to as low as $35.

Today (Monday), you'll be paying 80 cents a litre in the GTA, and Canada's outspoken Gas Buster, Dan McTeague, blames greed by a powerful oil oligopoly, who've hiked their profit margins at both the refinery and retail level - while the worst economic contraction since the Great Depression is pushing both business and consumer bankruptcies through the roof.

"Canadians are paying a premium for energy," says Liberal MP Dan McTeague (www.danmcteague.ca), who's launched a protest encouraging everyone to contact Prime Minister Stephen Harper by emailing This e-mail address is being protected from spambots. You need JavaScript enabled to view it and telling him "this is wrong."

Even with the exchange rate counted in, McTeague estimates motorists in the GTA are being ripped off by 8.2 cents a litre, using a pricing formula that includes the world price of crude, the price of refined gasoline on the New York Mercantile Exchange and the wholesale price.

The gouging climbs to as high as 11.9 cents a litre in Vancouver, and 11.6 cents in Calgary.

"This is costly and will artificially affect the price of home heating, transportation and food," he said. "This negatively affects Canadian productivity and quality of life."

Meanwhile, the gusher of record profits in the oil patch continues with Exxon Mobil (the world's biggest oil giant which owns Imperial Oil) raking in a brand new record in American history with a 2008 profit of a whopping US$45.2 billion.

This beat the previous record by a publicly-traded company, also set by Exxon Mobil when it raked in a profit of $40.6 billion in 2007.

Its fourth quarter results, however, did fall with a profit of $7.8 billion, as crude prices crashed by an alarming 60%.

Yet despite a 60% fall in crude, pump prices in Canada only fell by 23.5% in January from a year ago, according to the latest StatsCan report on the consumer price index, with Canada's inflation rate coming in at 1.1%.

But while gasoline prices fell, the cost of food jumped 7.3%, as the cost of bakery goods, cereal products and fresh vegetables were all higher. Shelter costs also jumped by an alarming 3.3%, thanks to higher natural gas prices, which pushed up home heating costs, as well as higher mortgage interest payments.

Which leads to this:  Canadians are also getting gouged with the higher cost of credit - as rates on lines of credit and outstanding credit card balances rise, even though the Bank of Canada rates has dropped to an historic low of 1%.

According to an insider, here's what's next.  After banks hiked their credit card rates to 24.75% and higher for clients who miss a minimum payment, plus hiked lines of credit rates and hit clients with a new inactivity fee, now this:  Retailers like Future Shop will start charging a $25 fee for accounts that hold more than one card, while it hikes its own retail card rate to 29.9%.  In Quebec, the rate jumps 17.1% to over 45% for those who take out insurance on outstanding balances.

In total, Future Shop has some 772,000 cards in circulation, and if a clients misses a payment on a promotion at 9%, the interest rate will jump to 29.9%.

This is highway robbery.

So, if you email Harper about the high cost of gas, include your complaints about the high cost of credit.  And remind him about this:

When he was in opposition, he accepted hundreds of thousands of protest coupons demanding a rollback of high taxes at the gas pumps, including the hated GST, a tax on tax.

Yet, since in power, not a peep - even though we're still paying an extra 1.5 cents in federal excise taxes at the pump, when the rate was hiked by the Liberals in the 1990s to 10 cents a litre to help rid Ottawa of deficits. Up until this economic meltdown, Ottawa's been sitting on surpluses for years, while the taxpayers get hosed and total household debt skyrocketed to a record $1.3 trillion.

Our leaders expect consumers to spend their way out of this mess.  Yet how can we with everyone's hands in our pockets?\

Enough!  Let Harper know what you think.

Email him at This e-mail address is being protected from spambots. You need JavaScript enabled to view it , or call him at 1-613-992-4211.  His fax number is 1-613-941-6900.  Or you can write him (postage free) at the Office of the Prime Minister, 80 Wellington Street, Ottawa, Ont. K1A 0A2.