CBC Go Public continues to do excellent investigative reporting and this week they caught banks behaving badly again, this time misleading and upselling customers on pricey credit card insurance. Known as balance protection insurance, this product charges a hefty premium (typically around 99 cents per $100 balance) to “protect” cardholders from missed payments as a result of job loss, illness, disability, or death.

But as 72-year-old Jolante Groves found out, the coverage comes with so many exclusions that it can be difficult to make a successful claim. Jolante’s husband George suffered a stroke in February that left him incapacitated and unable to make payments on his outstanding credit card balance. The card issuer, Canadian Tire, demanded payment and refused to allow Jolante to make an insurance claim on her husband’s behalf because the card was in his name alone.

Balance Protection Insurance

CBC’s Marketplace took their hidden cameras into some of Canada’s big banks in Toronto to investigate how bank employees marketed balance protection insurance when a customer signed up for a new credit card. If you’ve seen Marketplace’s or Go Public’s previous bank investigations before then the results will shock but not surprise you.

A BMO employee offered balance protection insurance but when questioned about it seemed to have little grasp of the product she was selling. A Scotia employee inaccurately claimed the coverage would pay off an entire credit card balance if someone lost their job. And a CIBC employee added balance protection to a credit card before the customer had a chance to decline the insurance.

That was also my experience with CIBC this summer when I applied in person for the CIBC Aventura Visa Infinite card. We never discussed balance protection at all. Several weeks later, before receiving the credit card, I got a letter from CIBC and Sun Alliance Insurance describing the balance protection coverage already enabled on my card. I immediately called to cancel it, but it made me wonder if this was common practice at CIBC.

Several anonymous bank customer service representatives revealed to CBC how they are under pressure to make sales targets and sell balance protection insurance to everyone who takes out a credit card. They’re misleading clients and often signing them up for the coverage without their knowledge.

Balance protection insurance is part of a list of useless products that are designed to enrich banks and dupe unsuspecting customers. It should be banned along with other insidious products such as mortgage life insurance, extended warranties, and deferred sales charges.

This Week’s Recap:

This week I compared the best high interest savings account options at Canada’s big banks, online banks, and credit unions.

Over on Rewards Cards Canada I described my CIBC Aventura Card adventure in further detail.

Weekend Reading:

Is there a problem with the way we envision retirement? An MIT study’s results were surprising and a little concerning.

The “Financial Independence, Retire Early” advocates are using assumptions about future market returns that are unrealistic.

A group of younger workers, devotees of the FIRE movement, are seeking ways to duck mistakes made by prior generations. (Wall Street Journal subscribers)

You’ve heard of stocks for the long run, but there are 30-year periods where bonds have outperformed stocks. Michael James answers the question of what we do with that information.

The Wealthy Barber David Chilton has partnered with RBC Wealth Management to raise awareness about estate planning options – specifically the idea of taking advantage of corporate executors:

“I am a big believer in the benefits of corporate executorship. In fact, I refuse to take on the executor role for even my closest friends’ wills. If you’re wondering why, you’ve probably never been an executor,” says Chilton.

If you have both a mortgage and an investment portfolio you might have wondered if it makes sense to use some of your investments to pay off your mortgage. Ben Felix explains what’s optimal and realistic in his latest common sense investing video:

Rob Carrick says this is a definitive sign you have overborrowed and owe too much.

Surprisingly, Carrick then makes the case for 30-year mortgages as a financial stress reliever for new home buyers. There is a sensible argument inside:

“Here’s a compromise if you’re gagging on the idea of paying that extra interest: Set up the mortgage with a 30-year amortization, but make extra payments so that you end up paying the amount you would have if you went with 25 years.”

Michael Batnick explains that where the market goes in your first ten years can have a disproportionate impact on how you think about investing for the remainder of your life.

Finally, one of my favourites – read Martin Short’s nine categories for self evaluation.

Have a great weekend, everyone!

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